Background checks gaining

Businesses that hire employees without screening them are vulnerable to all kinds of problems, ranging from lawsuits to bankruptcy.

"Past behavior is usually a good predictor of future behavior," said Kevin Klimas, founder of Clarifacts, a Phoenix-based company that specializes in pre-employment background checks.

Klimas spoke to business owners at a recent Arizona Small Business Association seminar.

"If an employee was dishonest at their last job, that's a pretty good indicator of what they'll be like at your company."

Klimas cited a local family owned company that had been doing business for four generations. The company failed to do a background check on a recent hire and discovered some time later that the employee had stolen $1 million from it, which immediately put it out of business.

Had the company done a thorough background check on this employee, Klimas said, it would have discovered that he had a history of stealing from employers.

Klimas said more companies are using pre-employment background checks as a way of uncovering such indiscretions as dishonesty on a resume or having a criminal history.

He said companies should always screen potential employees after extending a conditional offer of employment but before officially hiring them.

The most important benefit of a background check, Klimas said, is that it can help a company avoid the risk of trouble and even negligent-hiring lawsuits, in which employers can be held liable for the unlawful or improper actions of their employees if it can be shown they did not make reasonable inquiries into their background.

"These lawsuits are becoming very frequent and costly," he said. "It's easy for one employee to take out an entire small business, so background checks aren't a luxury, they're a necessity."

Les Rosen, co-chairman of the board for the National Association of Public Background Screeners, a non-profit organization that helps establish industry guidelines, said it is difficult to track how frequent and costly these lawsuits are. But he added that he has seen a marked increase over the past several years.

"Negligent-hiring lawsuits is one of the fastest-growing areas of civil litigation," said Rosen, a former lawyer who is frequently called as an expert witness in such cases. "In the years I've been in business, there's been a dramatic increase simply because employers are being held more accountable."

Rosen, president and chief executive of San Francisco-based Executive Screening Services, said he has seen jury awards of more than $3 million.