Do a thorough background check on
workers -- or let the hirer beware
By Richard Burnett • Bankrate.com

It doesn't take a Big 5 accountant or a rocket scientist to figure the value of pre-employment background checks.

It's simple.

Pay as little as $15 to run a basic criminal record check. Or risk losing tens of thousands, even millions of dollars, from the inside heists of a new hire with a devilish past.

In that equation, one could even argue that dropping $500 to $1,000 on a full-tilt background check -- criminal, civil, domestic, driving record, bankruptcy, etc. -- may be a bargain in the long run.

Just ask Jim Mulvaney, head of consulting firm KPMG's background investigations practice.

Recently, one of KPMG's clients hired a hot prospect as a sales manager, he recalls. So confident was the client that they decided not to invest in the full backgrounder.

The new sales hero stole $2 million from the company.

"We did a background check for the company later and learned that the employee had done six years in prison for a similar theft," Mulvaney says.

So let the hirer beware these days, background investigators say.

Don't let down your guard
In today's tight labor market, small business owners may be tempted to let down their guards. But it's not worth it.

Consider these events from the KPMG files:

--- A man applies for a job as a driver at a well-known New York charity while being free on bail for auto theft.

--- Another applies for an executive position in New York while having a felony spouse abuse warrant outstanding in the Midwest.

--- Doctors whose licenses were suspended in one state apply for positions in other states. Some medical professionals receive licenses by providing phony degrees.

--- Job applicants who turn out to be involved with organized crime.

"We've found many people submit false information about a number of items," Mulvaney says. "Among other things, it is routine to find on résumés that management trainees are transformed into managers, the word 'assistant' disappears from job titles and the word 'senior' gets added."

How many liars are out there?
Different studies have come to different conclusions about how common it is for job applicants to misrepresent themselves.

The Liars Index, put together by Jude M. Wern & Associates of Brookefield, Wis., looks twice a year at executive résumés and the most-easily checked reference point -- educational claims.

The Liars Index pegs the number of liars in 1999 at 16.7 percent and holding steady. That figure is within a few percentage points of where it's stood for the past five years.

Other studies that look at all aspects of résumés place the number much higher. About one-third of résumés have some degree of puffery, according to several surveys, and as many as two-thirds of all job applicants say they have stretched the truth at least once in an effort to land a job.

Your friend, the Internet
No matter how many there are, the means to catch them are also more available and affordable than ever. Key to this new investigative capability is the Internet. In many states, criminal records, civil suits, driving offenses and property data can be obtained online for a fee.

Entire Internet-based startup companies have formed to provide employers one-stop shopping for background checks. Among them are companies such as US Search.com, KnowX.com, AtYourBusiness.com, Infocheck Inc. of Greensboro, N.C., and Background America Inc. of Nashville, Tenn..

SmallBiz choices abound
Most customize their pricing to accommodate the small business.

AtYourBusiness.com, for example, offers a package through its Avert service that includes some free checks, discounts, consulting services, legal support and other pre-employment screening help -- all for a monthly charge of $20.

KnowX.com also offers discounts and incentives for volume purchasing of record checks. KnowX markets itself as a source companies can use to check up on other firms with whom it plans to do business, but it can also be used for individual backgrounding.

In addition to large firms such as KPMG, there are many smaller background consultants nationwide such as Personal Profile Inc. of Torrance, Calif.; Prove International Co. of Gross Pointe, Mich.; and Validata Inc. of Atlanta. Prices can range from $100 to $200 to do pre-employment checks.

But many smaller companies may still find the whole backgrounding thing a daunting process, something that feels a little awkward and sneaky to be digging into the past of someone who may eventually become a colleague.

Consider American Communication Technologies Inc., or ACT, a fast-growing Internet infrastructure company based in Orlando, Fla.

Forget criminal checks, credit histories and drug screenings, says ACT president John DeLozier. Credit histories aren't relevant in the vast majority of their hires, which are computer programmers and engineers.

Criminal or drug activity "is not tolerated and usually comes out in the discovery process," he says.

The intensive interview approach
In its own backgrounding efforts, ACT focuses on the statements of former employers, personal references, school transcripts and degree verification, DeLozier says.

"The most difficult area of background checks is getting information from former employers regarding the applicant's skills, abilities, personality and performance," he says. "They are often hesitant to discuss a former employee beyond the basics for fear of being sued for defamation."

So ACT relies heavily on its own interview of the applicant and asks extensive, in-depth questions about technical subjects, DeLozier says. Ultimately, they believe that a con won't be able to stand up to the high-tech interrogation.

Maybe so, but many experts wouldn't bet the house on it.

At least do a criminal check
Take Computer Recognition Technologies Inc., a small document imaging company in Skokie, Ill. A few years ago, CRT hired a new accounting assistant who was on the payroll only six months, but in a mere 90 days she forged $120,000 worth of checks and deposited them in a bogus account. An internal audit found the missing funds.

The accounting assistant was on parole for check forgery and substance abuse. CRT had neglected to do a background check. They found out when her parole officer called one day looking for her.

So it would be prudent for any small business to spring for the $15 to $20 to pay for a basic state police criminal background check -- regardless of how infrequently you hire new employees, says Robert K. Neiman, a labor and employment lawyer in Chicago.

"Having the piece of paper showing that you did the check is extremely valuable if the employer gets sued for negligent hiring," he said. "Keep in mind that in most states, an employer can base hiring decisions on convictions, but not on arrests."

Getting past ex-employers' silence
Employers increasingly are being held legally liable for the damaging workplace behavior of their employees -- much more often than a company is sued for defamation because they provided a negative reference for a former employee, Neiman says.

"Most attorneys tell their corporate clients to use a name, rank and serial number approach to references, out of fear of getting sued by the employee for slander or by the new employer for omitting key information," he says. "In fact, these types of suits are extremely rare. But it's so hard for an employer to get substantive responses to reference questions that some states have adopted laws encouraging openness in the process.

"One of the best ways to get something substantive from a tight-lipped reference source is to ask, 'Would you take this employee back if they asked?'" Neiman adds. "Most employers have a hard time avoiding this question, and anything other than an unqualified yes should set off alarms."

Richard Burnett is a freelance writer based in Florida
To comment on this story, please e-mail the Bankrate.com editors

-- Posted: May 15, 2000