On Thursday, William W. Bowser and I will present an audioconference on Applicant Screening With Google and MySpace. We’ll talk about whether the internet is a legal and ethical resource for use in the hiring process. A necessary premise of the discussion, of course, is that applicant screening is a good idea in the first place. Because, if it’s not, we don’t need to reach the Google-MySpace debate. We believe that employers must make efforts to screen candidates before making their final hiring decision.
1. Resume Fraud. An estimated 52% of applicants lie on their resumes. If you are able to determine which applicants have misstated their credentials, you can eliminate them from the get-go without wasting any more time in the process.
2. Limited Access to Information. Employers do not want to provide any more information than what is required and are very hesitant to respond to a reference request. But, at the same time, former employers often hold the key to the most relevant insight about the candidate.
3. Background Checks Are Costly. Many employers use an outside agency to perform background checks on potential employees. And for good reason. Background checks are complicated and time-consuming. But, hiring an outside agency costs money and many small employers either cannot afford or have chosen not to dedicate the necessary resources to performing these checks.
4. Compliance Issues. Employers who do use an outside agency face their own set of problems. The Fair Credit Reporting Act (“FCRA”) set standards for employment screening conducted by consumer-reporting agencies and outside companies. There is a list of compliance requirements triggered by the FCRA, including various disclosures an employer must make before, during, and after the background check has been performed. The FCRA also carries substantial penalties for non-compliance.
5. Bad Apples Are Expensive. Hiring is one of the most critical decisions a business will make. Failure to carefully screen and select applicants can result in employees who are (1) not qualified to perform the work hired to do; (2) whose work habits are not in line with the organization’s; (3) whose attitudes and personalities clash with coworkers, (4) hired under false expectations which later turns into poor morale and low productivity. The U.S. Department of Labor estimates that the average cost of a bad hiring decision can equal 30% of the employee’s potential earnings during the first year of employment. But that estimate is low–many submit that the number is closer to 100% for non-management personnel and 150% to 200% for management.
6. Employee Theft. The U.S. Chamber of Commerce estimates that theft by employees costs American companies $20 to $40 billion per year. U.S. consumers absorb this cost at the yearly rate of $400 per working adult. An employee is 15 times more likely than a nonemployee to steal from an employer.
7. Claims of Negligent Hiring and Retention. Employers can be sued and held liable if they fail to use reasonable care in the employment-selection process. “Reasonable care” is dependent on not just whether the employer knew about the candidate’s proclivities but also whether the employer should have known. In short, failure to screen applicants and to use proper care in hiring can result in legal liability.
8. Workplace Violence. Some two million American workers are victims of workplace violence each year. Certainly not every incident of violence could be prevented with applicant screening. But if pre-employment checks could prevent a potential incident from happening in your workplace, wouldn’t it be worth it?
9. Intellectual Property Concerns. Intellectual-property theft is a very real concern, costing American employers anywhere from $200 million to more than $1.2 trillion annually. As the workplace becomes more technology-based and employees become more technology-savvy, the risk of stolen trade secrets and other proprietary information will continue to escalate.
10. Federal Anti-Discrimination Laws. Of course, this is the biggest fear of most employers–that the person they hire will later “turn” on the company and file suit. And there is good reason to worry. Just ask Wal-Mart, which has been hit with several multi-million dollar lawsuits brought by employees in 2008 alone.