Hotel Employee Screening: Conducting Reference Checks and Background Investigations of Job Applicants Crucial to Preventing Personnel-related Problems / September 2010

By Tom R. Arterburn, September 3, 2010

Conducting thorough reference checks and background investigations of job applicants is crucial to preventing personnel-related crime.

"It's particularly important for officials in the hotel industry to screen employees for every hotel job," says Chuck Rice, senior attorney, Kilpatrick, Stockton, LLC, Atlanta, GA, "because they have such close contact with guests and the public. Many of them also have access to the personal property of hotel guests. Therefore, obviously, you don't want to hire people with a history of thefts or violent crime."

Experts in the field of pre-employment screening say reference checks and calls to former employers barely scratch the surface, when it comes to digging for information about a candidate. "A lot of employers, just to protect themselves from any potential claim of defamation or slander by the former employee, will only give out a verification that the person did work for them, the dates of employment, and the job title held. But the law doesn't exclude former employers from giving more information about an individual. They're free to tell the prospective employer the type of person the employee was, although many choose to provide only neutral information."

According to the web site of InfoLink, Chatsworth, CA, (www.infolinkscreening.com)--a national pre-employment screening company, the following issues should be considered when hiring new employees:

Falsified employment applications. With the job market toughening, applicant's tend to stretch the truth. Personnel administrators say one out of every four job seekers is a resume faker. Statistics reveal that near 40% of applications are falsified.

Employee theft. The U.S. Chamber of Commerce figures dishonesty costs 1%-2% of gross sales. It is estimated that 30% of business failures are directly related to employee theft.

Lawsuits. The average jury plaintiff award in employment law cases continues to be in excess of $1,000,000. It is important to note that in 1998 there were 80,625 claims filed with the EEOC. Of these, 19,578 were in California (24%), of which 4,937 were for sexual harassment. 5% of settlements are for more than $500,000.

Turnover. The cost of hiring, training, and then terminating one employee can be very expensive. According to a survey, turnover costs a minimum of $10,000 with 20% of respondents indicating costs exceed $20,000.

Negligent hiring liability. A rent-a-car company recently paid $750,000 to an employee who was raped by another employee. In 1999, Trusted Health was ordered to pay $26.5 million dollars to the family of a murdered patient. Courts throughout the U.S. declared prior to the time the employee is actually hired, the employer should have known of the employee's unfitness and is liable if they did not perform an adequate background investigation.

If these points are not thoroughly considered and addressed, the results can be problematic, as evidenced by these hiring-related cases involving:

Narcotics. In its first background check, one hotel found the applicant falsified his application and was convicted for possession of drugs.

Internal theft. "We were referred to a hotel by the Los Angeles Police Department, says Barry Nadell, president and CEO, InfoLink Screening Services, Inc., �because they were finding that the lock boxes, that guests put their valuables in, were being broken into at night. Consequently, they gave us a list of people to check, we called them the next day, and told them a particular employee was not going to be at work that day... we learned he was defending himself in court on a burglary charge elsewhere."

Contract services. A guard service was found guilty for inadequately checking a guard's references when the guard helped steal from their client. The charge-- negligent hiring as they failed to investigate, and the employee had a criminal record. The damages paid were over $300,000.

A hospital in a very good part of town identified, in its first month of doing background searches, four felons that they would have hired.

Unqualified applicants. Another hospital was found negligent in hiring a kidney transplant coordinator who was unskilled in reading medical charts and a patient was given a transplant of a cancerous kidney, which resulted in his death.

Another firm had no idea eight felons were among its employees; and two were on trial. In purchasing a company, the labor attorney recommended a background search on all employees before the deal was closed. The search revealed 8% of the workforce were using falsified social security numbers.

An employee, who had previously been convicted of passing bad checks, forged signatures on sales contracts. The court judged his employer negligent and awarded $175,000.

An Appellate Court awarded $4 million to a woman who was raped by an employee. His employment application indicated no criminal convictions, when in reality he had.

After driving for a telephone company for only a week, an employee was involved in a traffic accident. The jury learned that the company never saw the employee's driver's record which had five traffic tickets within 18 months. They awarded the injured party $550,000.

"One of the services we provide to our clients is a "hit ratio analysis," and it should shock you to know that some ratios are in the 20-25% range... this is the proportion of potential employees who have criminal convictions," says Nadell.

According to InfoLink, negligent hiring litigation is also a growing problem. Damages against employers are being awarded where the employer was negligent and failed to perform a reasonable search into the employee's background prior to hiring. Courts have ruled that an employer has a general duty to check criminal records for employees who will have interface with the public, or who could have a foreseeable opportunity to commit a violent crime against someone in the course of their employment.

Today's litigious society has created an environment which requires management to be armed with numerous tools. Many employers currently spend little time verifying the accuracy of employment applications; and, although they would like to adequately screen applicants, the cost to do so has, in the past, been financially prohibitive.

InfoLink also has a web service to request a Social Security trace or credit history, whereby the applicant's Social Security number is automatically checked for validation prior to search. �You immediately know if the number is invalid, and if valid, the year and state it was issued. If the number is invalid or the Social Security number was issued 20 years before the applicant was born, for example, you may wish to clear up the issue before proceeding with your search.�

InfoLink acquires its information from a variety of strategies, including:

Criminal background search. InfoLink performs hand searches of current records directly at the local, county, superior, and municipal court. Criminal searches are available nationwide, as well as in Canada and United States territories. Using InfoLink's network of 4,000 researchers, they access the most current up-to-date information available and provide a criminal conviction history from the date of disposition, parole or release from imprisonment based on applicable state law. They recommend a criminal search of all counties of residence and AKA's that are identified in a Social Security trace or credit history.

Motor vehicle Information. "While some companies believe motor vehicle information should be used only if an applicant will be driving a company car, we believe the information exposes important character issues. In addition, crimes are not isolated to where a person lives or works. By searching an applicant's motor vehicle information, we learn about suspended licenses, driving under the influence, possession of drugs, failures to appear in court, and arrest warrants."

Prior employee tracking. A free search of InfoLink inquiries by other clients is available to identify past employers that may have been intentionally left off of applicants' employment applications.

Employment verification. Applicants tend to stretch the truth, they say. Statistics reveal that nearly 40% of employment applications are falsified. "Dates of employment, position titles, and degrees earned are the most frequent things we see applicants lie about. InfoLink standard Employment Verification reports the employer's name and confirms the applicant's title, dates of employment, whether they're eligible for rehire, and asks for additional comments. Upon request, the company will also ask for the person's salary history. InfoLink also offers an Employment Verification "Plus" package that, in addition to the questions above, asks the interviewee to rate their past employee on the following attributes on a scale of one to five: 1) initiative and drive, 2) follow-through, 3) analytical ability, 4) organization skills, 5) adaptability to changes or breaks in routine, and 6) work ethic.

Employment/personal reference interview. InfoLink offers three types of reference Interviews: professional, management and executive. The professional interview reference includes questions that bear on applicants' professionalism, work ethic, and adaptability. The management interview includes the entire professional interview plus questions that focus on applicants' management capabilities. The executive interview includes the management interview, adds questions that focus on applicants' executive management skills and capabilities, and also allows clients to add 3 of their own questions to customize the interview for the position or industry.

Education verification. This reports the applicant's dates of attendance, graduation date, and degree earned. Some educational institutions will also report GPA.

Credit Information (PEER Report). This information includes name, current address with two previous addresses, Social Security number, phone, current employer, up to three previous employers, and aliases. A complete credit summary file also includes public records (i.e., liens, judgments, etc.), collection accounts, current or previous delinquent accounts, types of credit, and total indebtedness. It also displays a profile, i.e., account charged off, repossessed, etc., and alerts any confirmed or suspected fraud activity. This credit report is designed for employment purposes, so it does not place an inquiry on applicants' reports.

Released inmate search, which is a statewide search of all prison records, updated 48 hours after paroled. It reveals if subject served time in state prison for a felony conviction, provides his/her release date, and sometimes a picture I.D., as well as current warrant information for parole violations.

Sexual offender/child molester registry search, which searches databases of registered sex offenders per Megan's Law. In California, for example, there are 67,000 registered sex offenders including 37,500 registered child molesters.

Workers' Compensation history. This is a post-offer search available in most states that identifies workers compensation claims against applicants' past employers. The history will report the last 5 events and include case numbers, locations, case status, dates of injury, body parts injured, type of injury, and all party information including lien claimants. When applicants have filed workers compensation claims at past employers, they often intentionally leave them off their employment applications

Criminal Federal District Court search by district for Federal convictions which provides criminal history for the date of disposition, parole or release from imprisonment.

State repository criminal search, which looks for criminal convictions; however, records are not considered accurate or up to date and should not replace county searches. If a "hit" occurs, InfoLink requires a search of county records - also required under FCRA §606(d)(3).

Civil search - County Superior Court. It searches by plaintiff, defendant, attorney, or case number of Superior Court filings of $25,000 or greater. "We can also search civil municipal court records, but do not recommend the search as the cases are for less than $25,000."

Liens & judgments, which shows notices of default, county and state tax liens, and unlawful detainers.

Professional license verifications, which ensure the validity and current status of a professional license.

Military service verification, which show the candidate's branch of service, and current status.

Medicare/Medicaid fraud report through the Office of Inspector General, which searches health facilities in the National Practitioner Data Bank, cumulative sanction reports, and reveals debarred contractors from the General Services Administration.

Prior employer drug/alcohol test results. "We check with past employers to obtain information as to whether applicant 1) took a drug test, 2) failed any drug test, or 3) refused any drug test." Pursuant to 49 C.F.R., previous employers must provide information on past employees' drug and alcohol tests within the two previous years. Information will provide dates of confirmed positive tests for drugs, confirmed alcohol test results of 0.04% or greater, and refusal to take a controlled substance test within the past two years.

InfoLink does not use online or CD-ROM databases, which may be out of date and inaccurate. They say the Federal Trade Commission, in a staff opinion letter, wrote "an employment screening service that uses 'stored data' [which may be as much as 90 days old] does not comply with the Fair Credit Reporting Act Section 613(2)." Therefore, if a court is backed-up causing delay in acquiring a final report, the company can use a state registry (if available) to provide partial information while waiting for the county criminal court record.

"We go to the courts, with lists of names, twice a day," says Nadell. "Turnaround time is critical for our clients. Some people think you can get this information from a database or the Internet, and that information is not accurate. You have to physically go to the courts and pull these records, and that is what we do... all over the country. In fact, there have been many lawsuits for providing inaccurate information. If I tell a client a particular candidate was convicted of a crime, and they have actually had that [conviction] expunged or the case dismissed, that is a lawsuit waiting to happen."

Searches like (1) Criminal History, (2) Motor Vehicle Report, and (3) Social Security Verification as a package are only $24.80 plus court and DMV fees, and volume discounts are available. Additional searches are from only $3.00 to $32.50 depending on the search required. Information is provided normally within 24 to 72 hours except for some out of town courts or educational institutions.

InfoLink also uses the latest online technology available. Using the Internet, and a password, clients may request background searches, view reports in progress, view completed reports, print reports anytime or store reports on the company's secure server for later instant retrieval; all with no software required. Using the "work in progress" section, clients always know the status of a report and can use any portion of a report to make a hiring decision. You receive an e-mail upon the completion of the background screening report or the receipt of the results of a drug test. For on-line clients, some reports are completed within one hour of their request.

InfoLink subscribers typically experience savings due to the reduction in workload associated with applicant interviewing and reference checking. They say applicants' knowledge that a criminal, social security, and motor vehicle investigation will be performed acts as a deterrent even at the application stage. Thus, human resources professionals save time and money by not having to interview applicants who don't complete the application process. In addition, receiving a negative report prior to spending time calling references allows InfoLink subscribers to become more efficient and effective.

Rice suggests using a third-party provider like InfoLink can help avoid some of the pitfalls associated with in-house investigations. "Many states have statutes that protect employers from liability surrounding the release of negative information, he says. "This was to encourage more freedom of information passing between employers. But I don't know if it has been that successful, because employers are still nervous either because they are reluctant to change their policies, or simply don't know that the laws exist."

In this age of data bases and transfer of electronic data, many hoteliers are turning to pre-employment screening services for information about prospective employees. But many of them are unaware of the legal ramifications associated with this short cut.

"Under the Fair Credit Reporting Act, and a number of similar state laws," explains Rice, employers, before they request a criminal record or other information from a third party, must notify the applicant that they intend to acquire one of these consumer reports. In addition, they must obtain the prospective employee's written permission to do so."

Nadell agrees that these verification documents are important, and says they are often mishandled. "Many companies who contact us who are currently using the forms of another background screening company, find that they violate federal law, state law, or both. There are sections of the Fair Credit Reporting Act that specify that the disclosure form must be solely of the disclosure. It must say that a report may be requested, and that the individual must authorize the background report. For example, I was just faxed a form to review, which did not have wording that would allow continuous checks to be performed. So if a person was up for promotion or transfer to another location, further checks could not be conducted legally. And unfortunately, if the person refused to sign a new form, the company would have no recourse. They would not be able to terminate the person for not signing the disclosure form. They simply would not be able to do the background check."

Hoteliers have probably noticed the television commercials: a personal injury attorney sympathetically reaching out to victims of malpractice, work-related accidents, etc. And Nadell says attorneys have a new line on litigants--victims of unfair hiring practices. He points to an advertisement recently published in USA Today--donning bold type and a toll-free number, with the headline "DISCRIMINATION AT WORK... call for free consultation."

"Many of the attorneys are realizing that there is money to be made in defending consumers against violation of federal and state [employment] laws, and it is much easier than ambulance chasing."

What's more, hoteliers in some states need to pay attention to their unique situations. "Finding that someone has a criminal record is not necessarily a reason for disqualifying them from employment,� says Rice. �The criminal record information has to relate to the job if you are going to disqualify someone on the basis of it. In some states, there are even statutes that say an employer may not consider some types of criminal convictions at all. This is because there is a higher proportion of minorities who get convicted of crimes than non minorities, and you can end up with a race or national origin discrimination claim. In California, for example, you cannot even ask about certain criminal convictions, such as marijuana offenses. Therefore, if you ask a third party to gather information from California, you need to tell them you do not want any information about these statutes."

Another problem to avoid is inappropriately acquiring credit information about a candidate, adds. Nadell. "Credit reports should only be accessed if the [candidate] can affect you financially. For instance, looking into the credit of a receptionist, who cannot affect you financially, is almost an invasion of their privacy."

Tom R. Arterburn is an independent journalist and director of The Resume Institute, a job-search firm focused on the hotel industry.