RSM Resources

When an Iowa food distributor hired James Sweeney to investigate the embezzlement of $125,000, the inquiry eventually led to the company’s controller — who admitted stealing the money to pay restitution for embezzling from a previous employer in Texas.

"A simple $20 background check would have uncovered that," says Sweeney, president of Davenport, Iowa-based James M.Sweeney & Associates Inc., a consulting firm that specializes in investigating employee misconduct and criminal activity in the workplace. A criminal check in the controller’s past county of residence likely would have revealed the earlier embezzlement case, preventing the $100 million Iowa firm from making the bad hire, incurring losses and paying for the investigation, Sweeney says.

In the wake of Sept. 11 and corporate scandals, many midsized companies are taking a fresh look at how they conduct background checks on prospective employees. According to surveys by the Society for Human Resource Management, employers are increasing criminal and credit checks, while decreasing verifications on an applicant’s work history. In a recent survey, 80 percent of employers said they checked references, and 79 percent checked work history, down from 92 percent and 84 percent, respectively, seven years earlier. Meanwhile, the percentage of companies that conducted criminal checks increased to 80 percent from just 51 percent, and credit checks rose to 35 percent from 19 percent.

Experts say employers can mitigate the risks of selecting dishonest or weak-performing employees by implementing a comprehensive, consistent strategy for investigating all job applicants. That approach not only improves the quality of new hires but greatly reduces a company’s potential exposure to litigation.

"Background investigations are typically fast and inexpensive in comparison to other employment costs," Sweeney says."The courts are saying you can’t afford not to do these."

A checklist for background checks
Some prospective employees embellish their records on resumes, job applications or in interviews, hoping to gain a competitive edge or cover up personal or professional blemishes. To help ensure your company doesn’t get fooled, experts suggest using the following 10-point checklist to create an effective background-check program.

1.     Employment. Make sure an applicant worked where and when he or she disclosed, even if previous employers will confirm only limited information such as dates of employment, job title and final salary.

2.     Previous job responsibilities.  Ask each candidate for previous job descriptions and conduct an in-person interview, using proven techniques to ask probing, open-ended questions to elicit detailed descriptions of past duties and accomplishments.

3.     Eligibility for rehire. Determine an applicant’s eligibility for rehire with past employers — confirmation that the employee was a productive, dependable worker whom the companies would hire again if given the opportunity.

4.     Certifications, licenses and degrees. Check with professional or trade organizations and state regulatory boards to confirm an applicant’s certifications, licenses and standing, and contact educational institutions to verify academic degrees. You’ll need a signed release to obtain verified copies of an applicant’s transcripts.

5.     Criminal records. Check criminal records dating back at least seven years within the county and state where the applicant resides. In addition, check federal records to identify any undisclosed felonies.

6.     Civil records. Investigate liens, judgments and lawsuits involving the applicant in the appropriate jurisdictions.

7.     Driver’s license. Check driving records to reveal drunk-driving, seatbelt,speeding and other violations that could reveal past avoidance of safety practices, reckless behavior or substance abuse.

8.     Credit history. For positions that involve handling cash,financial records or customer credit information, check an applicant’s credit history to help determine any financial improprieties or mismanagement.

9.     Social Security. Search Social Security records to find an applicant’s previous addresses. This step can help you decide if additional financial or criminal checks may be warranted in multiple jurisdictions.

10.  References. Talk to former direct supervisors and urge them to disclose performance information they wished they had seen before hiring the candidate as well as problems they encountered.

When hiring C-level executives or other critical positions, companies may want to delve even deeper into candidates’ backgrounds. For example, Internet or newspaper searches could reveal details unavailable in official records. Once you determine the appropriate background checks for all positions in your organization, apply them consistently to all candidates in the same classification — or risk charges of discrimination.

Cost, privacy and other considerations
Pursuing comprehensive background checks is not costly — and could save a company money and headaches by preventing fraud or other unwanted activity. A typical background check requires 24 to 72 hours and averages $45 to $60, Sweeney says. Criminal checks in multiple jurisdictions will increase the time and cost.

Companies that conduct background checks should becareful to use available information properly. For example, always use identifiers such as Social Security numbers and dates of birth, when available,to verify that the records you find match the person you are investigating. When you collect information, be sure to safeguard it with the same standards of confidentiality you apply to employee files.

Background information on prospective employees is increasingly available on the Internet, which may lead some employers to conduct background checks with internal resources. However, many companies use outside consultants to conduct background checks when they lack the internal resources,or to ensure the investigations are conducted accurately, efficiently and lawfully.

Experts say it’s important to properly interpret and use data collected in background checks. For example, companies can’t automatically discriminate against a prospective employee based on a criminal record that is not job-related — such as holding a drunk-driving conviction against someone who would not be driving on the job. Rules may vary by state,so it’s important to know how to collect data properly in different jurisdictions. If you use a third party to conduct a background check, be sure to comply with the federal Fair Credit Reporting Act by obtaining the applicant’s written authorization.

In an age where hackers can add names to university records and people can buy fake diplomas online, employers must be more vigilant and sophisticated than ever when screening job applicants. Conducting thorough background checks can help ensure prospective employees are all they claim to be — potentially saving your company significant aggravation, expense and legal troubles.