24 August 2005. Harvard Emeritus Professor, Derek Bok, once said, "If you think education is expensive, consider the cost of ignorance." By the same token, if you think pre-employment background checks are expensive, consider the cost of a bad hiring decision.

The U.S. Department of Commerce estimates that 30 percent of all business failures are the result of bad hiring decisions. While a typical background check costs far less than an average day's pay, one serious hiring mistake can sink a small business.

Companies should have particular concerned about negligent hiring lawsuits. An employer can be held responsible for unlawful or improper acts of an employee, when it fails to conduct a pre-employment background check and the employee has a prior criminal record. For example, 28 year old Christina Appleton was stabbed to death by co-worker, Arvie Carroll, a convicted murderer placed with Iron Horse Vineyards by a temporary agency that did not conduct a background check. The case went to trial and the jury awarded the family $5.5 million. According to industry experts, California employers lose negligent hiring suits 60 percent of the time, and the average verdict award in such cases is $870,000.

A criminal check is a key component of a background check.... But the more types of checks you conduct in combination with one another, the more powerful the background check.

Employers have a legitimate need to know whether job candidates have relevant criminal convictions, and employees have a right to expect a safe and secure working environment. The demand for pre-employment background checks has soared in the wake of shocking acts of workplace violence, recent corporate scandals and 9/11. According to the Society for Human Resource Management, 80 percent of employers now are conducting background checks routinely. By comparison, only about half of employers ran background checks in 1996.

It is imperative for employers, large and small, to have a safe hiring program in place. The process should start before a prospective employee fills out an application. You should inform the applicant that a background check is part of the hiring process. This in itself may provide a deterrent to those with a criminal past. Additionally, the job application should include a question about whether or not the prospective employee has been convicted of a crime.

A criminal check is a key component of a background check. However, a criminal check has become a "buyer beware" product. Many Web-based information brokers provide criminal checks that sound very good—they are cheap, provide instant results, and claim to be "national" in scope. But in reality, many online criminal check databases provide little more than a false sense of security.

The best method for checking criminal records in the U.S. is to send someone to the courthouse to manually search the records. While this sounds ridiculously low-tech in this day and age, the simple truth is that there is no national criminal database available. The FBI has a national database, but it is not public record. Checking criminal court records in the locations where the applicant has lived does not provide a guarantee that the person has never committed a crime. However, U.S. Department of Justice statistics indicate that most crimes are committed a short distance from where the criminal's place of residence.

Social Security Number verification is another standard component of a background check. This check provides an extensive address history, as well as the name or names that are associated with the use of the SSN. If you know where the applicant has lived, and you know what names the applicant has used, you can determine where the criminal checks need to be conducted. Therefore, an SSN verification makes a criminal check more effective.

Social Security Number verification can be extremely important in cross-checking information listed on a prospective employee's application or resume. For example, if the applicant claims to have lived and worked in Sacramento for the past six years, but the check finds a two-year-old address in Los Angeles, it would be a red flag.

Social Security Number verification also provides the employer with information about whether or not the SSN is valid, as well as when and where it was issued. Authentic looking Social Security cards can be purchased on the street for about $135.00. Social Security Number verification frequently detects fraudulent SSN's, numbers issued before the person was born, or numbers that belong to a deceased person.

While the criminal check, combined with Social Security Number verification, is a front line of defense against hiring a criminal, doing additional types background checks increases the likelihood of spotting a problem. Many employers request a driving record as part of a standard background check, whether the employee will be driving on the job or not. The DMV record can point to substance abuse problems when there are DUI's or reckless driving convictions. Beyond that, if the individual has numerous moving violations or accidents, or if he repeatedly fails to pay his tickets or show up for court dates, it may indicate a pattern of behavior. The individual may not be someone you can count on to show up for work consistently and on time.

A credit report can also be a powerful tool. But unless you are hiring the person for a position where money will be handled, it should not be the sole criterion for making a hiring decision. If the applicant has excessive debt, numerous collections, judgments, tax liens, or a bankruptcy, it could indicate a pattern of behavior. In addition, the applicant's wages may be subject to garnishment. The credit report also provides information regarding former names, addresses and employers. This information should be cross-checked against the application.

Workers' Compensation checks are commonly requested as part of a background check, particularly in California, where the premiums are high. Under the Americans with Disabilities Act (ADA) and the California Fair Employment and Housing Act, a Workers' Compensation check cannot be conducted until there is an offer and acceptance of employment. In California, the law applies to any private employer with five or more employees. The kinds of information available with this check are: body part injured, date of injury, employer name, and final outcome. While you cannot ask an applicant whether he or she has ever filed a Workers' Compensation claim, you may inquire about whether they are able to bang away at a computer keyboard all day. If they indicate that they do not have a problem typing all day, but you find a claim for carpal tunnel syndrome, you may withdraw the job offer.

The more types of checks you conduct in combination with one another, the more powerful the background check. Our company has performed many tens of thousands of background checks on all kinds of employees—from factory workers to physicians. We have found that when there is a criminal record, there is also likely to be inconsistencies with the names and addresses reported with a Social Security Number verification, and there will probably also be unpaid traffic tickets and bad credit. All of these checks point to patterns of behavior. There is no substitute for careful interviewing and checking references. However, objective fact-driven information should be part of the front-end evaluation process.

© 2005 Lynn Peterson all rights reserved.

Lynn Peterson is founder and president of PFC Information Services, Inc., a public records research firm located in Oakland, California.