Negligent hiring and retention liability normally refers to an employer’s obligation not to hire an applicant, or retain an employee, that the employer knew or should have known was likely to undertake conduct against other individuals, or otherwise subject employees or third parties, e.g., customers, to actions which can create legal liability. Employers can be held liable for willful misconduct by their employees.
Through negligent hiring and retention lawsuits, many employers have been found responsible for their employees’ actions, even when the employee was no longer working for the company at the time of the crime. Negligent hiring and retention lawsuits have cost companies millions of dollars in damages, forcing many companies into bankruptcy.
Case law in every state recognizes the concept of negligent hiring and retention liability. Thus all employers need to understand this business risk, as employers are affected by both their current and former employees.
An example of a former employee posing risk to their previous employer would be where the ex-employee used a thumb-drive to download customer or patient information, then quit their job, but later used that misappropriated information to steal the identity of hundreds or thousands of the employer’s customers. If this individual had a criminal history of identity theft or credit card theft, then the employer would most likely be found negligent in a courtroom.
Another example is for any company that accepts credit cards. Employees and former employees who had criminal records for credit card theft, should they use your customers’ credit card information to steal again, then they would place your organization at risk for negligent hiring and retention liability.
However, in today’s world of viral social media, it’s not even necessary for a lawsuit to be filed. Your company’s brand can be severely or fatally damaged by social media reports of the lackadaisical business practices that allowed your employees or former employees to hurt (physically, financially, etc.) your customers, vendors, or even other employees.
A company’s best defense against negligent hiring and retention liability is to perform a thorough background check by a reliable background screening company. Be sure that the background screening company is also a consumer reporting agency, and one that understands the Fair Credit Reporting Act (FCRA, the federal law that governs employee background checks). By performing a thorough background check, the employer can show their company was not negligent, whether defending themselves in a court of law, in front of a television or newspaper reporter, or in social media.
Posted by: Rudy Troisi. President, Reliable Background Screening.