Avoiding Disasters in the Hiring Process

An Interview with Barry Nadell, CEO & Co-Founder of InfoLink Screening Services, Inc.

EPLiC, Spring 2003

Editor’s Note: This article recaps a discussion that took place on December 18, 2002 between EPLiC co-Editor Don Phin and Barry Nadell, President & CEO of InfoLink Screening Services, Inc.

Hiring Horror Stories

Before beginning the interview, EPLIC [Employment Practices Liability Consultant] co-editor Don Phin recounted 5 "horror stories," each of which involved destructive, costly behavior by employees. In all 5 instances, these horror stories could have been prevented had these employees’ backgrounds been investigated.

• An employee at a nursing home kidnapped, raped and killed an elderly patient. A background check would have discovered that only two months previously, the employee had been released from Folsom State Prison, a maximum-security facility, on felony charges involving violent conduct.
• An employee at an electrical manufacturing firm was a witness to sexual harassment of a co-worker. When the witness threatened to tell management, the harasser threatened the employee with bodily harm. A background check would have discovered that the harasser had an arrest record for assault and battery and frequently competed in "ultimate fighting" contests.
• A warehouse manager used the facility to deal drugs, funding his "business" with stolen goods. A criminal background check would have uncovered multiple felony drug arrests.
• A venture capital firm hired an executive to run its mortgage banking division. The executive was subsequently fired for non-performance. He then filed a multi-million dollar wrongful termination suit. During discovery, it was revealed that he had bankrupted the two previous companies he ran and had recently filed for personal bankruptcy.
• A worker called in sick one day, stating he needed to “dry out.” A check of motor vehicle records noted that his license had been revoked six months earlier for drunk driving, during which time he had been conducting business in a company vehicle.

Why Do Companies Hire Poorly?

Don then proceeded to discuss the reasons why some companies do such a poor job with the hiring process, despite knowing of potential risks like those stated above. Based upon his experience, he noted two of the most prominent reasons for these failures, which include:

Desperation. Due to poor planning, companies often need someone so quickly that they must bring in the first remotely qualified person. But given such haste, the companies rarely do the kinds of thorough background checks that would have revealed obvious problem employees.

Rationalization. Given human nature, interviewers tend to "fall in love" with a candidate on an emotional basis in the first 10 minutes of an interview and then spend the next 50 minutes looking for logical justifications to support their belief. The end result is that a person’s weaknesses---often glaring ones---are often overlooked. Beware: true "villains" have mastered the art of inducing this form of infatuation during interviews.

How Can Poor Hiring Practices Be Eliminated?

To avoid these problems, Don noted the steps that can be taken, which include:

1. Involving more than one person in the hiring process. By eliciting additional opinions about a candidate, problems can be identified that a single individual might ordinarily miss. This is particularly true if the opinion being solicited is that of a person whose instincts about previous candidates have proven accurate.
   
2. Having a sound hiring process in place. The time to develop a written plan of how an organization will go about hiring is not when a job needs to be filled on short notice. Rather, the plan must already be in place at that time. See Don Phin’s sample Hiring Checklist at the end of this article.
   
3. Using conditional job offers. Job offers should be made contingent upon a candidate's passing a drug test, criminal background check, credit check and satisfactory verification of past employment records.
   
4. Inserting contractual language within a job application. A statement should be included within a company’s employment application to the effect that "...providing of any false information is immediate grounds for dismissal."
   
5. Using "Bad Boy Clauses." Such provisions in an application (or in an employment contract) indicate that the employee will forfeit certain benefits for specific kinds of wrongdoing. For example, one version of this clause could state that an employee is barred from exercising stock options if there has been any misconduct, such as selling trade secrets to competitors.
   
6. Determining if a candidate’s "hands are tied." Through use of non- competition, trade secret and non-disclosure agreements with a current or past employer, employees are sometimes prohibited--- for periods of up to five years---from disclosing certain proprietary processes or trade secrets if they go to work for a competitor. Similarly, employees are at times circumscribed in their ability to work for certain competitors or to work within specific territories for stated periods of time. Both types of restrictions may render a new employee valueless.
   
7. Ascertain the candidate’s standing with his current employer. Again, "true villains," the types of employees who cause real havoc within an organization, are adept at building an impressive resume and leaving a company just prior to being fired. In effect, they are "artful dodgers." Prospective employers must be on guard against hiring people who have caused problems with prior employers and could, for example, be on probation or under investigation for misconduct, and at the same time are seeking another job prior to being terminated for cause. To uncover such problems, during the interview, request references and then call the references before the candidate has had an opportunity to "prep" them.

Don Phin: Barry, now that I’ve provided some stories and strategies about employees from hell, tell us about some that you have experienced.

Barry Nadell: A home health agency was considering hiring a person on whom we were conducting a criminal background check. The check indicated a prior conviction for 2nd degree robbery. Two days later, we received a fax, which was the front page of a local newspaper, showing that the person had been arrested for murder and kidnapping!

Don Phin: Give us a thumbnail sketch of the work your company does.

Barry Nadell: InfoLink Screening, Inc. is a consumer reporting agency, as defined by the Fair Credit Reporting Act (FCRA). The company serves businesses and employees by providing reliable and accurate employment screening on job applicants and employees, as well as on- and off-site drug and alcohol testing.

Don Phin: You’re an acknowledged expert concerning the Fair Credit Reporting Act. How does it affect your work?

Barry Nadell: The Act can at times function as a barrier toward successful employee investigations. Nevertheless, employers must abide by its provisions. At the risk of oversimplification, there are 3 key provisions with which employers must comply:

1. Lawful Purpose for the Investigation. Prospective employment constitutes a lawful purpose.
2. Disclosure of the Investigation. The employers must have authorization from the employee to conduct the investigation. Such authorization must be clear and conspicuous.
3. Legal Form. The candidate can’t be forced to sign an illegal form, such as a form containing a waiver of the right to sue, despite employer misconduct.

Why do Pre-Employment Screening?

Don Phin: Why is it important to do pre-employment screening?

Barry Nadell: The purpose of screening is to verify that the information submitted by the applicant is accurate and complete. But often, the person who “seems too good to be true” is exactly that. A survey published by the Society for Human Resource Management (SHRM) in 1998 indicated that the following categories of information, found in resumes and job applications, contained false information:

• Length of employment 53%
• Past salaries 51%
• Criminal records 45%
• Former job titles 44%
• Former employers 35%
• Driving records 33%
• Degrees 30%
• Credit 24%
• Schools attended 24%
• Security number 14%

And as our horror stories indicate, many would have been prevented had employee background checks been conducted during the hiring process.

A Typical Background Check

Don Phin: Walk us through a typical background check.

Barry Nadell: There is no typical process. It depends on the specific job and the company. But I always recommend beginning by verifying the candidate’s social security number.

Don Phin: Why?

Barry Nadell: The number itself indicates the state and year of issue. So, for example, if a number shows that it was issued in 1945 and the candidate appears to be no more than 25 years old, the employer is immediately alerted to a problem with this particular candidate.

Don Phin: Can you comment on the explosion of false academic credentials?

Barry Nadell: Obviously, there are a lot of them out there, especially with the proliferation of “diploma mills.” A company in England offered me a degree at the relatively high price of $500. Why? This company was willing to provide a transcript! Most just give you a piece of paper, which is essentially worthless because when attempts are made to verify that a degree was awarded by a particular educational institution, the school’s records indicate that the candidate didn’t graduate, and in many instances, never even attended the institution.

Don Phin: What do you recommend as a minimum, basic search?

Barry Nadell: Minimally, a search should consist of: social security number verification, a criminal background check, and obtaining a motor vehicle report.

Don Phin: Why check driving records?

Barry Nadell: A motor vehicle report discloses convictions for driving under the influence (DUI), drug possession, and failures to appear. In addition, these reports may contain current arrest warrants. And for employees whose primary job function involves driving, I recommend obtaining a motor vehicle report at least every year, preferably every six months.

Don Phin: What else do you check?

Barry Nadell:  After doing these basics, a company should make decisions to go further based on job category. For instance, a day care center would do a check of sex offender databases.

Don Phin: While we’re on the general subject of background checks, I’d like to offer the opinion that it is always better to take the risk of being sued for failure to hire, based on adverse material revealed in a background investigation or allegations of privacy invasion, than to not investigate at all.

Barry Nadell: I completely agree. The typical horror story is one in which there is no pre-employment background check in the personnel file. One situation that comes to mind was a CFO, who had “negotiated a settlement” with his prior employer because he had committed embezzlement. But there was no attempt to investigate his background prior to hire!

Criminal Background Checks

Don Phin: Why is it sometimes difficult to conduct a criminal background check?

Barry Nadell: Because each state has different requirements, which are continually changing. Making the task even more complex is the fact that approximately 4,000 different counties in the United States maintain criminal records.

Don Phin: What are some of the traps to avoid in doing criminal background checks?

Barry Nadell: One key element is to watch out for time lags in these records. They may not always be current. As a result, a recently committed offense may not yet appear in a record.

Don Phin: Are criminal records generally available?

Barry Nadell: Not always. There are a number of major restrictions as to what information can be accessed, again, depending on the particular jurisdiction. For example, some records are sealed, often due to the age of the offender or because a certain number of years have elapsed since the offense was committed.

Don Phin: Are the records comprehensive enough for your purposes?

Barry Nadell: Again, not always. For example, the reports don’t include details when there has been an arrest but no conviction or when there has been deferred adjudication of a youthful drug offense.  But the reports do include situations in which someone has been charged with a crime but is out on bail.

Don Phin: What about limits on how long certain information remains within a database and can be reported?

Barry Nadell: 12 states have time limits on how long the information can be reported. For example, in Colorado, it is 7 years from the date of conviction. In Massachusetts, it is 7 years for a felony and 5 years for a misdemeanor. In addition, there are limits on the types of information that are available. For example, in many states, arrests and convictions for drunk driving don’t even show up in the criminal record.

Don Phin: Can an employer ask about arrests and then deny employment after learning of an arrest?

Barry Nadell: Only in industries such as law enforcement and aviation, or in health care where the arrest was for sex crimes or drugs. But in most other industries, employers can’t deny a job due to an arrest that did not lead to conviction.

Don Phin: How should the question regarding of criminal arrests and convictions be worded on an application?

Barry Nadell: Asking only about felony convictions is problematical for two reasons. First, because a felony in one state could be only a misdemeanor in another state, such as battery. Second, because felonies are sometimes plea-bargained down to misdemeanors. In either case, a potential “employee from hell” would not technically have been a convicted felon. So the best wording is: “Have you ever been convicted of a crime?” and adding the qualifying statement that “A conviction will not be an absolute bar to employment,” which is required by the Equal Employment Opportunity Commission (EEOC).

Don Phin: How should you handle the process of advising a prospective employee that a criminal background check will be conducted?

Barry Nadell: The Fair Credit Reporting Act requires the employee be informed that the background check is being conducted and he or she must consent to it. When making this disclosure, I recommend that the disclosure document be as ominously worded as possible.

Don Phin: Why?

Barry Nadell: Two reasons. First, it makes the candidate aware of the investigation so that there can be no argument about the lack of permission to conduct it. Second, if a candidate has something to hide, these types of warnings will quickly weed out such prospective employees. Instead, they will seek employment with “softer” employers who don’t have the same degree of controls in place.

Don Phin: What is the cost of a typical criminal background check?

Barry Nadell: Generally, a criminal background check can be obtained for less than $20.

Don Phin: Should such a check be conducted on all prospective employees?

Barry Nadell: Yes. And I don’t recommend limiting it to only those handling cash or those working with young children, as examples. Remember: any employee can hurt you regardless of the sensitivity of the position. Here is a horror story illustrating this point: prior to the time they began conducting criminal background checks on all employees, one of my clients, a hotel, had hired applicants for valet parking jobs despite having convictions for stealing cars!

Credit Checks

Don Phin: What about credit checks? Should a company do them on all prospective employees?

Barry Nadell: I generally recommend this only when a person’s position can have a direct financial effect on the company. I wouldn’t, for example, recommend it for a receptionist. On the other hand, a company should run a credit check on person interviewing for the job of controller.

Don Phin: What happens when you must reject someone because of a negative credit report?

Barry Nadell: If you do reject an applicant for credit problems the reason must be job-related, such as when an applicant for a cashier’s position has credit issues. Then again, if a person can’t handle credit, this does become a problem even in jobs not directly involving access to company funds, because credit is a character issue.

Don Phin: With what other important aspects of credit reports should companies concern themselves?

Barry Nadell: You can’t reject someone based on a prior bankruptcy because a bankruptcy absolves all debts.

Don Phin: What if a credit report reveals a garnishment of wages?

Barry Nadell: Garnishments can’t be used to reject a potential hire. Just because a person has money problems doesn’t mean the person will automatically perform poorly. But again, the problems shouldn’t be so severe as to distract a person from doing their job or, for instance, from having to use significant amounts of office time to fend off creditors.

Overcoming Resistance to Background Checks

Don Phin: In your opinion, why are companies reluctant to conduct background checks, even for sensitive, high-level positions?

Barry Nadell: Part of the reluctance is based on the resistance the companies encounter when they ask about an employee’s record with a prior firm. In addition, employers are leery of providing information about former employees, mainly for fear of being sued. My advice is not to give up too soon when it comes to the reference checking process.

Don Phin: In the pre-hire stage, a job candidate has a much lower expectation of privacy when it comes to background checks, than after being hired. Before being hired, employers don’t need "probable cause" as a rationale for such investigations. After being hired, that’s a different story. At that point, the employer needs concrete reasons for doing such investigations.

What if a viable job candidate objects to this whole notion of background checks? This may be especially true of higher paid employees at the officer level; for instance, those making more than $150,000 per year.

Barry Nadell: To overcome resistance, the best thing is to put the necessity of background checks in a written corporate policy. This way, candidates won’t feel as if they are being singled out. Making it part of written corporate policy takes "personality" out of the equation. But if candidates are truly company and team-oriented, they shouldn’t object to the process because background checks are ultimately for the protection of the organization and its employees.

Don Phin: Another way to overcome this problem is to use a release form that the prospective employee signs, which, in turn, is sent to the former employer. (Editor’s note, you can get this form by going to the end of this article.) This gets the former employer off the hook for releasing negative information.

One more general comment from my experience: very few lawsuits have come from background checks---especially when the job candidate was advised that such a check would be conducted and agreed to it. When you weigh this relatively minimal risk against the potential costs of hiring "an employee from hell," such risks are far outweighed by the potential benefits.

How do you overcome just getting "name, rank, and serial number," such as only being able to verify title, salary, and dates of employment, when checking references?

Barry Nadell: A good follow-up question after receiving such information is to ask "Is the person eligible for rehire." Just being able to obtain either a "yes" or "no" answer at least gives you some feel for the quality of the prospective employee. But even asking this question can sometimes cause problems for an investigator because the privilege is only qualified, not absolute.

Don Phin: What about fees for detailed reference checking?

Barry Nadell: Be leery of firms that charge low fees. This is not mechanical work for which people can be paid minimum wage. It simply can’t be done "on the cheap." The prices of national companies are within pennies of one another for this type of work; so don’t fall into the trap of hiring a service that offers to do detailed background checking for a fraction of these standard fees.

Don Phin: In summing up, it’s clear that the front-end costs of employee background investigations are minimal, compared to the severe costs that a company can absorb on the back-end, because they failed to perform the kinds of checks you recommend.

*

Barry Nadell can be reached at 9201 Oakdale Avenue, Suite 100, Chatsworth, CA 91311
(818/800) 990-HIRE (4473), www.infolinkscreening.com. Barry has he’s agreed to offer EPLiC users a free background check. Don Phin can be reached at [email protected] or (800) 234-3304.