Dave Casem: Employee Screening
A background check of potential hires can save your entire company.
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I want to say hello to members of STAFDA. It is an honor for IRC, Inc. (Information Resources) to have the privilege of being a service provider to STAFDA members. As you may or may not know, IRC provides employment background checks. Our company operates under Federal and State law, specifically, the Fair Credit Reporting Act.
We are a Consumer Reporting Agency (CRA), providing criminal records research, previous employment verification, credit reports, professional license verification, as well as many other types of screening services. We operate in all 50 states, the U.S. territories and Canada. International screening is also available.
Independent distributors along with manufacturers are finding business growth more challenging than in years past. Global competition, the cost to keep up with advances in computer and communication technologies, as well as new regulations and laws are causing additional liabilities. These changes also provide opportunities for the creative business person.
Distribution is a demanding industry. You may not have the time to deal with the thousands of regulations all businesses experience. Services such as ours allow you more time to run your business and seize opportunities in the area of your expertise, rather than worrying and spending time keeping up with new regulations that do not pertain to your actual business. Dealing with HR, employee laws and regulations as they relate to hiring practices is our business. It is more important than ever to partner with experienced service providers that you can trust.
The Good, the Bad and the Ugly
Good employees are an invaluable asset to any company, but a detrimental person can be a tremendous liability. Years ago it seemed to be cut and dry in choosing good employees and screening candidates for job positions. Managers used first impressions, instinct, experience and simple screening information to weed out negative applicants for a job position. Those types of hiring practices today can get you sued. Whether we like it or not, if it makes sense or not, the laws and regulations are mandatory and they vary from state to state.
When Information Resources first opened its doors for business in 1988, there was no internet, no widespread use of personal computers and little competition in the background screening industry. It took hard work, lots of labor and talent to obtain and research information on people.
With today’s software and database companies acting as wholesale information providers, the door is open for thousands of inexperienced people to market themselves as screening companies. The lack of experience and knowledge has caused many lawsuits for companies large and small. Utilizing a screening vendor that does not know about hiring regulations will not protect a business from liability.
Today some states do not allow employers to obtain credit reports on potential employees, some have time limits on the age of negative information including
criminal records, while some job positions and industries are excluded from such laws.
It takes years of experience to understand the hundreds of details associated with these regulations. This is why it is so important to partner with an established CRA who has years of experience in the development of procedures designed to protect the employer as well as the employee.
Cheap database companies typically utilize computers with a minimum human factor, or none at all. Employers are provided with every piece of information that exists in a database with no explanation of what the information means or how it can be used. The result is almost always resolved by lawyers.
Background screening was not always a wide spread service utilized by all industries as it is today. In fact, just a mere thirty years ago, screening was almost solely performed by the government for positions which required a secret or confidential clearance. With changes in political correctness and other types of regulations, the attempt to balance the work force as it relates to gender and race has forced companies of every size to educate themselves on the meanings and use of such laws or learn them in court.
Let’s take a look at the statistics
- On average, office fraud lasts for two years before it is detected.
- A typical organization loses five percent of its annual revenue to employee fraud.
- Nearly one-third of all employees commit some degree of theft.
- 37.1 percent of total thefts are committed by a manager.
- 25.3 percent of the amounts stolen by employees annually amount to $1,000,000 and up. (The median amount is $175,000.)
- In 2010, one in every 33 employees was apprehended for theft from their employer.
- 60 percent of inventory losses are caused by employees.
- About 75 percent of employers lose negligent hiring cases with settlement claims averaging $1,000,000.00
- Negligent hiring cases have bad verdicts costing up to $40 million dollars.
- Employers have lost more than 79 percent of negligent hiring cases.
- 49 percent of the 3,100 hiring managers surveyed had caught a job applicant fabricating some part of his/her resume.
Remember, it costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee and $40,000 to replace a senior executive. Many of these cases could have been avoided by running a pre-employment background check. It costs less to run a background check on a person than the amount you will pay them for their first day of work.
I Screen, You Screen, We All (Should) Screen
There are three reasons why companies screen prospective employees. First, some highly-regulated industries are required to screen by law. There are a large variety that fall under this category including banks and other financial institutions, transportation which includes airlines, rail and trucking and all medical related companies that deal with government programs such as Medicare.
The second type of company that screens is one that was burned by insufficient hiring practices or the hiring of a detrimental employee. Litigation may cost a good portion — if not all — of a company’s profits when an employee’s behavior causes a lawsuit. Since a
screening costs less than one day’s pay to that employee, a background check is an easy decision.
Most companies that are associated with this reason for screening are small to medium sized companies which cannot afford the costs of in-house attorneys or an army of HR professionals in order to develop procedures to avoid liability. Small and medium companies are vulnerable targets for civil litigation.
The third type of company is the mega corporation with unlimited funds. They have in-house attorneys and a team of HR professionals who develop quality management manuals with procedures that address every possible liability. Such procedures include the screening of every new hire by a proven CRA. This is known as being proactive, and perhaps one of the reasons these companies maintain success.
In conclusion, being proactive is always a positive thing, however many companies cannot afford the research or the time to develop quality management procedures specific to their business. Thankfully, STAFDA provides a variety of services that make being proactive affordable for so many medium and smaller companies. This allows member distributors and manufacturers to focus your energies on what you do best, “running your business.”
If you are curious about employee screening or have questions about hiring practices, please feel free to contact us. All STAFDA members are eligible to utilize
our services at a discounted rate and advice is free. Regular pricing is posted on our website at www.irverify.com, as well as other useful information. CS
Dave Casem is CEO of IRC, Inc., STAFDA’s consulting partner for background checks. Contact Casem at 866-781-8160 or at www.irverify.com.
CONTRACTOR SUPPLY MAGAZINE
The October/November 2024 of Contractor Supply magazine is here!
Our cover story, A Rewarding Passion - Dale Hahs II, third-generation of Denver's AIS Industrial & Construction Supply, is STAFDA's incoming 2025 president.
A Special STAFDA section featuring a welcome address, an agenda, session previewss by presenters and much more. Also in this issue are our Industry Updates on: Lifting, Moving and Material Handling; Lasers, Levels and Measurement; Hand Tools; Cordless Power Tools; Drill Bits and Cutting Tools; and Toolboxes, Bags and Belts.
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