As we were saying when we left off… There are less than 100 cases a year, on average, where a candidate sues a company because someone gave him or her a bad reference. About the same number of organizations, though, get hit by negligent hiring lawsuits – and they pose a much greater threat to corporations worried about liability issues.
Why? For one thing, the money. The average settlement in lawsuits for negligent hiring exceeds $1.6 million (Bliss, Wendy, J.D., Legal, Effective References (SHRM, 2001), p.7.)
But even more importantly, let’s think in terms of damage. In the former case, the suit comes about because someone didn’t get a job they wanted. In the latter case, someone got ripped off, sexually harassed, or physically harmed – possibly even killed – and the employer should have known that the person responsible might cause harm.
“These checks are becoming increasingly important because of the liability issues involved in hiring and employment,” says Harry E. Chambers in his book Finding, Hiring, and Keeping Peak Performers (Perseus, 2001). “If candidates have a history of behavioral or performance problems that should have been discovered through a reasonable pre- or post-employment search, your failure to uncover them could be judged as negligence if you employ them and problems occur that are consistent with their past patterns. You could be held both personally and organizationally liable.” (p. 218)
So what is negligent hiring, exactly? My company, SkillSurvey, obtained a legal opinion on this question. (Of course, you’ll want to check with your own counsel.)
“[Negligent hiring] cases focus on defining what duty is owed by the employer to a third party when an employee commits a crime or other bad act… The consensus is that an employer may be found negligent if he knew or should have known that an employee had a propensity for conduct that would harm a third person. (Coath v. Jones, 277 Pa. Super. 479, 419 A.2d 1249 (1980) and Restatement 2nd of Torts Section 317.) The negligence may be found by an act of omission and the risk of harm must be foreseeable. Given the multitude of employment settings, these cases are quite fact sensitive.” (Legal opinion for SkillSurvey from Elizabeth Anderson, Esq., 21 Feb 2005.)
Here’s a great example case, from an article by Charles S. White and Lawrence S. Kleiman, "Avoiding Negligent Hiring Liability: The Case of Mary Foley” (Contemporary Times, 1997, Spring Vol. 15 Issue 59, pg. 31-37):
“Consider the case of poor Mary Foley…Mary started a small temporary service company… she assigned a retired military man to a position as a night watchman at a warehouse. What Mary did not know was that the man had never really been in the military... had a prior criminal record and current debt problems. He took the easy way out by stealing equipment… Since he technically worked for the temporary employment firm, Mary got sued. What is worse – Mary will probably lose the lawsuit.
"…Negligent hiring holds that an employer may be liable for employee acts even if they are outside the scope of employment. The requirements of this tort are satisfied when the offending employee is hired without an adequate background investigation and such an investigation would have indicated the applicant was a risk. Legally, negligent hiring is defined as: ‘The failure of an employer to exercise reasonable care in selecting an applicant in light of the risk created by the position to be filled.’ (Bates, Norman, “Understanding the Liability of Negligent Hiring,” Security Management, 1990, p.7A.) This definition means employers must screen individuals adequately before they are hired.”
And here’s another example that our legal expert found in the case law:
“In Brezenski v. World Truck Transfer, Inc., the Superior Court had to address the foreseeability issue and hence, the scope of an employer’s duty to protect third parties from harm. It began its analysis by reiterating the principle that an employer may be held liable for negligence if it knew or should have known that an employee was ‘dangerous, careless or incompetent and such employment might create a situation where the employee’s conduct would harm a third person.’” (Anderson opinion, op.cit.)
So how does the legal system decide that an employer has been negligent? “The fundamental issue is whether the employer has taken reasonable precautions to avoid hiring people who might pose a significant risk to others in the job that’s being filled. The courts have consistently ruled therefore, that employers must obtain a detailed history of the applicant’s background, in order to avoid liability due to negligent hiring.” (Hoffman, Edward, Psychological Testing at Work (McGraw-Hill, 2002), p.41.)
So what’s “reasonable”? How detailed a check is “adequate”? Here’s another case that offers some guidance:
“…[A decision by the Pennsylvania Superior Court] in R.A. v. First Church of Christ, 748 A.2d 692 (2000) … involved an action against a church for its alleged failure to properly hire and supervise a minister who sexually abused R.A., a minor. Prior to being hired by First Church, the minister had no criminal record and had not been investigated for the commission of a crime. He completed a questionnaire and submitted a videotape sermon along with a resume and a list of fourteen references. None of the references provided any information suggesting that the minister had ever committed a crime or had a history of sexual misconduct. The minister submitted to a lengthy interview which went well. He visited with the elders and members of First Church prior to his hire.
“After R.A. was assaulted, the minister was indicted and he eventually pled guilty to numerous counts of rape and similar offenses. Plaintiffs, R.A.’s parents, sued both First Church and the minister. The trial court granted the church’s motion for summary judgment, prompting plaintiff’s appeal.
“The Superior Court addressed plaintiffs’ claim that First Church was negligent in its hiring and supervision of its minister (Citing Sections 213 and 317 of the Restatement 2nd of Torts).
“Plaintiffs alleged that had the church investigated the minister’s background more thoroughly, it would have learned of his homosexual affair in high school and of several other incidents of a sexual nature. The Court found that the church’s hiring practices were ‘reasonably thorough’ and disagreed with the plaintiffs’ contention that the church had a duty to specifically inquire into all of the minister’s prior sexual conduct. (Id., 698.) It reiterated the many steps taken by the church to inquire into the minister’s background, none of which produced any negative results.
“R.A. supports the view that where a thorough background check fails to uncover something which would put a potential employer on notice of a problem which is directly related to the basis for the alleged misconduct, the employer will not be held liable.” (Anderson opinion, op.cit.)
So it’s not hard to make a reasonable effort and protect yourself from a potentially nasty lawsuit. That would be reason enough to get rolling with an efficient and effective reference checking system … but just wait till next time, when we look at the positive benefits that reference checking can provide.
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