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HR Detectives on the Case to Prevent New-Hire Nightmares

Listen up San Diego employers. Here are a few cautionary tales from the crypt that are bound to send chills up your business’ spines.

A biotech company in Torrey Pines was suffering a series of thefts involving its computer hardware.

“There was no evidence to go on,” recalled Gordon Schmidt, president of the Carlsbad-based private investigation firm, Palomar Investigative Group Inc. “We knew it was probably happening at night, so we put surveillance on the building for a few days.”

And then, during the wee hours of the night, his investigators cracked the case.

“Our investigator documented the nighttime security supervisor loading his trunk with brand-new HP printers,” said Schmidt, who had then ordered a check on the guard.

“We found out he had a $10,000 warrant out for burglary,” Schmidt recalled. “Talk about a breakdown in the system and the right hand not knowing what the left hand was doing. He had no business working anywhere as a security guard.”

Want more?

Consider this local applicant for a job fighting fires. A background check showed that he had recently been cited for tossing a cigarette out of his car window.

“We thought that was pretty ironic,” said Schmidt.

Then there was the case of a fellow who had applied for a job with one of Schmidt’s clients, who works with children in the entertainment industry. The applicant was a registered sex offender.

Most companies that engage in employee background checks have their own stash of horror stories to tell, but those businesses actually ordered the screenings. What about those that don’t?

“Pedophiles look for work,” said Robert Mather, chief executive officer of the Redding-based Pre.employ.com Inc., MyBackgroundCheck.com and Past-Employ.com. “Very few employers will knowingly hire a child molester.”

But, Mather said, he encounters children’s sports leagues all the time that don’t run background checks on volunteers.

“It’s amazing the ones that don’t,” said Mather, whose clients include San Diego businesses.

Also amazing are the types of people who ask to have themselves screened.

“We have a certain percentage of people who know they have criminal records and want to see what the employer will see,” said Mather. “In any given day, we will get dozens who have committed some of the most heinous crimes in the world coming through our system, and we get 10,000 transactions a day, from all over the world.”


Knowledge Is Power

More and more companies are doing background checks these days, said Rick Bergstrom, co-chairman of Morrison & Foerster LLP’s employment group in San Diego.

“Companies are trying to avoid hiring problem employees, and the liabilities and problems that come with that,” he said. “You see instances where you may have an individual who gets involved in an altercation at work or (is accused of) using drugs. After the incident, the employer learns that the person had a record for altercations or drug abuse, and, if they had known, they wouldn’t have hired them. They say, ‘We don’t want to have that happen again.’ ”

Do events such as 9/11 and the corporate scandals of recent years feed this need to know?

“Are people doing background checks because of a terrorist threat?” Bergstrom asked. “I don’t think so. Corporate scandals? You’re not going to find information that will be relevant that a person is likely to embezzle, or become involved in some board scandal. They don’t necessarily have criminal records or credit problems. It’s much more nuts and bolts , ‘We don’t want to have sex, drug or physical abuse.’ ”

Schmidt, whose client base includes members of the San Diego Employers Association, agreed.

“I think that it’s more a matter of companies that have gotten burned because of who they were hiring, and/or they are tired of getting rejects from companies that don’t perform screening,” said Schmidt. “If most good companies out there are doing screening, and those efforts are stopping undesirable people from getting through the door, they need to go to someone for a job, and they will target those who do not do the screening.”


Business Is Booming

The screening business is indeed booming, according to Barry J. Nadell, senior vice president, background screening, for the West Coast office of InfoLink Screening Services Inc. in Chatsworth. He’s also co-chair of the National Association of Professional Background Screeners, and author of “Sleuthing 101 , Background Checks and the Law.”

“Every year, we make projections as to what we feel the upcoming year will do, regarding the number of new clients, revenue and searches,” he said. “Every year, it exceeds our projections in every category. More and more companies are choosing to do background checks.”

Taking a break during the recent annual conference in Austin, Texas, of the 600-member NAPBS, Nadell, whose clientele includes local businesses, notes that some companies continue to resist.

“Eighty to 100 percent of large companies do background checks,” he said. “But that doesn’t mean they do background checks on everyone they hire. Many only do them on management and executives, some on one division, or in one location. But, I think that is changing.”

Melissa Drake, president of the San Diego Employers Association and a specialist in human resources consulting and training, has noticed a pro-active trend among businesses.

“We hear from members asking what are they allowed to do,” she said. “There is a subtle shift from going after an investigation when you think somebody has done something wrong to trying to get background checks ahead of time during the application process. It’s better to find out then.”

Most businesses are concerned with such workplace issues as drug use , especially in high-risk industries , and credit issues for those in financial services areas.

“There have been so many instances over the past five, six years, where employers are held liable for hiring someone who harms someone in the workplace,” Drake observed.


True Dirt

HR departments have been increasingly skittish about revealing information about former employees beyond the basics, precisely because of the possibility of lawsuits.

“Our advice to a company or HR staff is, if they get a call for a reference, to only give dates of employment and the position held,” said Bergstrom. “Probably 10 out of 10 management-side attorneys would give that kind of advice.”

But it’s not only the negative information given out about a former employee that can bring a business down, said Bergstrom, recalling a precedent-setting case that reached the California Supreme Court in 1997.

“A company that hired an employee called a prior employer for a reference, and was given information about the employee, but was not given all of the information,” he recalled.

In this case, the employee had been accused of sexual harassment at his former job, but the information wasn’t disclosed. The new employee ended up being involved in another sexual harassment incident. The new employers sued the former employer for misrepresentation, and the court found that by failing to disclose all of the information, the company was potentially liable for misrepresentation.

“If you tell part of a story, then you have to tell the whole story,” said Bergstrom.

Dirk Broekema III, CEO of San Diego-based On Call Employee Solutions Inc., which provides administrative, financial and technical staffing, agrees that HR personnel tend to be more discreet. But, line managers are more apt to go beyond name, rank and serial number, he said.

“They tend to be more open if it’s positive, but you will hear the bad and the ugly, too,” said Broekema.

One of the big problems he encounters is what he delicately calls “inflated resumes.”

“There definitely is false information that people put on their resumes, from education to experience,” he said. “We interview and thoroughly screen our applicants through skill-checking software, and we dig beyond references.”

Primary references tend to be those who are friendly or had good relations with an applicant, said Broekema. It’s the secondary references that can turn up any red flags, he said.

“If you were to give me the name of Sam Jones over at ABC Company, I will call Sam,” said Broekema. “More than likely, he will offer up other names. On the next level down, you start getting the true dirt.”

Nadell would prefer more opening all the way around.

“Our clients hire us to do reference checking,” he said. “They want us to find out everything we can find out. But then someone calls them, and they give name, rank and serial number. Employers shouldn’t tie the hands of the agencies they are using.”

They do so at their own peril, said Nadell, recalling one incident involving a major company that planned on hiring a chief financial officer.

“We were doing our reference check,” he said. “Our researcher was getting only good information, so she kept digging and uncovered that this person actually had negotiated a settlement with his previous employer for embezzlement.”


Services Rendered

Peter Kelly, president of Carlsbad-based Stealth Insight, which conducts pre-employment background checks and tenant screening services, said small- to medium-sized businesses tend to be most prone to liability.

But many of these companies tend to misunderstand the nature of background checks.

“They think it’s like an FBI check or ‘Mission Impossible,’ ” Kelly observed.

A solid background check doesn’t have to be pricey or flashy, he said.

“Ninety percent of the market’s needs can be met with a basic Social Security verification,” said Kelly. “If I find other names associated with that number, it brings up concerns.”

The cost of background checks can vary from $20 to hundreds of dollars, depending on what a business needs to know.

“Most employers will do county criminal searches, looking at all the places you have lived in the last seven years,” said Nachman.

Some businesses want to verify employment history, or that an applicant actually graduated from a particular school, and earned the degrees claimed on the resume.

Background searches often include driving records, especially important if the job involves operating a company car; a credit history, crucial if there are financial responsibilities involved; and screening for sexually-oriented crimes, a necessity for those who want to work with children.

“Driving records are a very valuable source of information,” said Schmidt. “They are a good indicator of substance abuse problems, especially if there are DUIs. And, unpaid traffic tickets can translate to an arrest warrant. If there are unpaid tickets, there probably is a suspended license, so how do they get to work? Are they going to be operating a company vehicle?”

The San Diego Employers Association includes the Padres, Kyocera Corp. and the San Diego Zoo. But most are businesses with 25 to 75 employees, said Drake, and money is always a concern.

“It’s expensive to be a business owner in California, but it’s more expensive to end up with a negligent hiring suit,” she said. “If you do some sort of background check and showed that you tried, you will be better off than if you didn’t do anything.”

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