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References

Special Report on Obtaining Employment References

November 12, 2008

By Lester Rosen, Attorney and CEO of Employment Screening Resources (ESR)

1. Introduction - Advantages and difficulties of reference checking.
 2. Why are Verification and Reference Checking so Important?
 3. Policy and legal considerations in giving and obtaining reference checks.
 4. Various options for giving references.
 5.Various options for obtaining references.
 6. Why it is important to try to obtain references, even if a former employer will only give name, rank and serial number?
 7. When does it make sense to outsource employment reference checking?
 8. How does Employment Screening Resources (ESR) go about obtaining employment references?
 9. In person interviews for highly sensitive positions.

1. Introduction - Advantages and difficulties of reference checking

Employers agree that it is critical to know whom they are hiring. Employment reference checking can be an essential part of that process. However, it can often be a very frustrating part as well. Many employers, on advice of legal counsel, have a no comment policy, allowing only verification of basic information, such as start and end date, and job title. Some companies will not even release salary information, even with a signed release.

The result can be frustrating for everyone. On one hand, firms need the information. On the other hand, there is concern that if they give such information, there can be legal complications. Good prospects are unable to get recommendations they deserve, while applicants with a negative history can go on to a new employer with their history behind them.

Despite these problems, human resources professionals are unanimous that every effort must still be made at reference checking. In this special report, Employment Screening Resources (ESR) discusses why it should be conducted even if no information is given, when it makes sense to outsource it, and finally, how ESR engages in reference checking.

2. Why are Verification and Reference Checking so Important

There are a number of reasons why former employment verification and reference checking is so critical. First, it should be clear that Verification and Referencing Checking are two different terms.

Verification usually refers to verify factual matters, such as start date, stop date and job title.

Reference Checking means questions about qualitative matters, such as job performance, strong points, weak points and similar matters.

According to industry experts, up to one-third of all resumes contain material falsehoods. For employers, a resume is a factual document that is needed for decision making. For applicants however, a resume can be a sales or marketing tool.

An important reason to check references are to achieve better hiring fits. Information is often better in the hiring process then intuition or instinct. Often times, how a person has performed in the past is a best indicator of how they may perform in the future.

Reference checking also helps protect a company. First, by verifying dates of employment, an employer can make sure there are no unexplained employment gaps. It can be important for an employer to understand what a person was doing during a significant gap. It also confirms the honesty and accuracy of the resume.

Most importantly, it protects the substantial investment that an employer makes when hiring. Not only does it take time to recruit, hire and train, but mistakes can be costly. Estimates of the cost to replace employee range form $10,000 and up. A bad hiring decision can create untold administrative, financial and legal difficulties.

3. Policy and legal considerations in giving and obtaining reference checks

Many legal authorities advise employers that a response to an inquiry about a former employee should be limited to verifying dates of employment and job title only. It is argued that employers who give any information beyond the basics can face lawsuits alleging defamation. If the former employee has filed any type of discrimination charge against an employer, the employee can also face a lawsuit for retaliation.

The hesitation to give references exists despite protection given under California law. In 1994, California Civil Code Section 47(c) was amended to protect employers from defamation law suits when giving an employment reference to another employer. It states,

"This subdivision applies to and includes a communication concerning the job performance or qualifications of an applicant for employment, based upon credible evidence, made without malice, by a current or former employer of the applicant, to and upon request of the prospective employer."

Under this law, an employer has protection provided that the information is:

Job related;
 Based upon credible evidence; and
 Made without malice.

(Obviously, it is illegal to purposefully give false information  just for the purpose of preventing someone from obtaining employment.  In California, Labor Code Section 1050 makes such behavior a misdemeanor.)

However, even with this protection, many legal sources argue that the risk of a defamation claim outweighs any benefit to an employer from giving reference information. Further, what constitutes, "credible evidence," or what is "job related," can be open to interpretation.

Even where a positive reference is given, an employer can face legal difficulty. In a recent California case, the State Supreme Court ruled that a school district can be liable for damages, where it gave a very positive job recommendation, and left out important negative information. The Court ruled that a former employer providing a recommendation owes a duty to protect employers and third parities and could not misrepresent the qualifications and character of an ex-employee where there is a substantial risk of physical injury.

The lesson is that when an employer does provide a reference, the employer must fully disclose both the good and the bad. Otherwise, no reference should be provided at all.

The law arguably places employers who give recommendations in a Catch-22. If an employer fails to disclose an accusation because of insufficient credible evidence, then the employer risks being sued by third party victims. However, if the employer does mention an accusation, the ex-employee can arguably sue for defamation.

If there is no question that the conduct occurred, such as a criminal conviction, then an employer is probably on safe grounds. However, in situations where the former employees can dispute the accusation, an employer may be concerned about a lawsuit. For example, suppose a former employee was accused of harassment. A Company investigation indicated that the harassment occurred. If the company reveals that to a new employer, the previous employer could still potentially face a lawsuit.

Because of these complications, and the fact that an employer has no obligation to give a reference, many lawyers advise the no comment policy. Unfortunately, if everyone followed this policy, then all companies are placed in jeopardy because it becomes very difficult to know whom you are hiring.

4. Various Options for Human Resources professional and employers who are asked to give references

In response to these difficulties, employers and Human Resource professionals have responded in various ways. Many firms have a rigid policy of not giving any information beyond the basics, such as start and stop date and job titles. Requests for references are often referred to payroll or accounting. That gives the maximum legal protection. A number of large firms have signed up for a "900" number telephone services where employment verifications are conducted by a computerized voice only. Other firms are willing to indicate only that a person is eligible for rehire. However, some companies are concerned that even stating that an employee is not eligible for rehiring can cause legal exposure.

One possible solution is to follow the old adages that unless you have something nice to say about someone, then do not say anything. Some companies have a policy of only giving reference information when they can do so without reservation. Although an ex-employee can complain that by implication that no reference is in fact a negative reference, that would be a hard claim to make.

Other companies who would like to give negative information do so "between the lines."  One example is to suggest that the new potential employer ask their applicant to send a release of their performance appraisal files, because that would make interesting reading.  That  can be enough to raise a red flag.   Also keep in mind that there is no such thing as comments, "off the record."  If litigation should ever occur, and a human resources staff member is asked to give a deposition under oath, there is no privilege not to reveal information given "off the record."

Other companies as a matter of their own corporate philosophy are willing to disclose negative information as well, in order to protect other employers and the public. In those situations, it is important to take steps to document the sources of the information and whom it is given to.

In all cases, the following guidelines should be considered in giving reference information:

A firm should have a written policy and procedure for giving references;

All information should go through a central source. This gives a firm consistency and reduces the chances that a manager may give out information that is contrary to company policy;

Clearly document who is requesting the information and for what purpose. Former employees have been known to have friends or paid "reference" checkers contact previous employers. Also document exactly what is provided.

Also clearly document who in the company is giving the information. That can be important in order to trace whom exactly said what in a reference check. In addition, staff members may leave company, and without a written record, an employer may not be able to defend their actions,

If the information requested goes beyond dates and job title, a company may ask for a copy of a written release. This can also provide some protection against defamation lawsuits; and

If an ex-employee has filed a discrimination charge or lawsuit against the company, then no information should be given beyond job dates and job title without contacting your legal department.

If the employer intends to give negative information, the following may be helpful:

Remember that employees most often seek the advice of an attorney when they are surprised. Therefore, a former employee should not hear for the first time from some new potential employer that they are getting a negative reference. If references are an issue, that should be handled a the time the employee leave;

Disclose only factual information—make sure everything has been documented;

Avid conclusions, and give facts instead. For example, avoid saying that a former employee had a "bad attitude." Instead, convey facts showing a failure to get along with team members. Let the facts speak for themselves.

Include favorable facts about the employee. That demonstrates that an employer is even handed;

Make sure the Personnel file is factually correct. That is something that HR may do when an employee leaves.

In the event the former employee has a pending claim against the company for any reason (e.g. workers compensation, lawsuit), an employer should strictly limit any comment to only the basic data, such as start date, end date and job title.

5. Various Options for Human Resources professional and employers who are seeking to obtain employment references

HR professionals seeking to obtain references face a substantial challenge. Sometime, it is just not possible to obtain references where the previous employer has an established policy against giving references. Often time, the challenge is to locate an actual supervisor or former supervisor who is willing to talk about the applicant. Many firms refer all such questions to payroll or accounting, where a staff member can only give the basic information. The new "900" number service does not even allow for a discussion with a live human being—it is all done by computer.

HR professionals can sometime engage in professional networking to obtain reference information. Sometime just reading "between the lines" can be of assistance. A previous employer may be unwilling to give specific information, but may be willing to convey a sense of the applicant or communicate in some other "unofficial" manner. It should be noted that there is no such thing as an "off the record" comment. Should a matter ever go to litigation and a deposition is taken, an HR manger or employer would have a legal obligation to reveal all the details of a conversation if directly asked.

If nothing else works, a firm can at least be asked if the previous employer would rehire the applicant, or whether the applicant is eligible for rehire. Although the eligibility for rehire question does constitute a "reference question," many firms are comfortable with answering that. However, a "no" answer could be considered defamation unless there is god reason to back it up.

Other challenges facing HR professional trying to obtain references are:

Obtaining references takes a great deal of time and energy. It requires repeat telephone calls, and call-backs that occur sporadically throughout the day, while to do other things;

Since each applicant will normally have at least two if not more references, HR must track the status of each application to determine which ones are complete. Furthermore, when the call-backs come during he day, the caller may not necessarily know whom the call was about. HR needs to track who is being called for which applicant;

Other companies will not return calls or respond to voice mail;

Some employers will only respond by mailing a written release and request;

Some companies have sent all their employee information to a computerized "900" number;

Sometime an applicant worked at the previous company as a temporary, under a contract or was actually employed by a third party employer organization. In those situations, the precious company will show that no such person worked there. In those situations, the new employer must try to locate a co-worker;

A previous employer may no longer be in existence, or may have merged or been acquired, and no one can locate the personnel records;

The applicant has a company name but no phone number, and the HR must try to track down the location of the former employer;

Hr must of course be careful not to contact the current employer.

Depending upon the importance of the position, and the time and resources available, HR may attempt to talk with professional reference that that applicant has supplied. When that is done, another technique is to ask the "supplied" reference for another name of a person that may know about the applicant. That is known as talking with a "developed" reference. That may give an HR professional the opportunity to talk with someone who did not know that a reference would be requested, and can be a very valuable source of information.

6. Why it is important to try to obtain references, even if a former employer will only give name, rank and serial number

Despite the fact that many firms have a "name, rank and serial number," policy, it is still essential that employers conduct prior employment reference checks.

First, even the verification of just basic data is a valuable tool in the pre-screening process. By contacting former employers, a prospective employer can at least verify that the applicant did in fact work for a particular employer for a particular time period. Given the fact that most experts estimate that resume fraud occurs in at least 30% of all applications, this is valuable information.

Secondly, not all employers have the "no comment" policy. Many firms are still willing to give recommendations, particularly for a good employee. Or, a supervisor or co-worker may be willing to give information about a good employee.

Finally, and most critical, a firm must at least attempt to obtain employment references to protect itself from lawsuits for Negligent Hiring. Attempting to check for references, even if they cannot be obtained, demonstrates Due Diligence.

Negligent hiring is a failure to exercise reasonable care when selecting new employees. If an employer does not make a reasonable inquiry about the person they hire, and the employee causes injury, then the employer can be found financially responsible. Many employers have faced lawsuits and disastrous awards of damages as a result of injuries to members of the public or a co-worker. Exercising Due Diligence is the best protection against legal exposure.

Of course, the level of reasonable inquiry depends upon the nature of the job and the risk to third parties. A higher standard of care may be required for hiring an executive then a cashier. However, every employer has a legal obligation to exercise appropriate care in the selection and retention of employees. The law does not require that an employer be successful in obtaining reference. But, it is clear that an employer must at least try.

All authorities agree therefore, that taking reasonable care means attempting to obtain employer references, and documenting those attempts. The documentation can be important in the event that the employer is sued.  

7. When does it make sense to outsource employment references checking?

There is a growing trend among profitable and efficient organizations to outsource services that although vital, do not represent the company's core strength. Many firms are finding that it is an inefficient use of their time and energy to attempt to perform services that a third party specialist can provide efficiently and cost-effectively.

The difficulty with performing employment reference checks in-house is not the time the actual interview takes. It is the constant interruptions of returned phone calls throughout the day, tracking the progress of each candidate, and making repeated attempts when there is not a call-back. It can also take time to locate former employers and phone numbers, as well.

Even for a firm with a fully staffed Human Resources department, employment reference checking is a time consuming task. There are so many functions that only an in-house HR department can provide that it makes sense to identify those tasks that can be efficiently outsourced to a third party.

Many firms have found that outsourcing this task to a professional firm that specializes in pre-employment screening allows HR to devote more time and recourses to the function of managing people and the delivery of vital HR services to employees.

There are times however, when a firm would likely want to do reference checking in-house. This may apply to sensitive or critical positions where the supervisor or HR manger wants to receive input directly from previous employers. Even if the previous employer has a "no comment" policy, there may still be an advantage in talking personally to the previous employer and attempting to glean what information is available "between the lines."

8. How does Employment Screening Resources go about obtaining employment references?

At Employment Screening Resources, we strive to make our reference checks thorough, professional and legal. In conducting employment reference checks, we recognize that the information that we provide can be a critical component of the hiring process.

First and foremost, our interviewers do not simply call former employers and go through a perfunctory list of questions. The goal of each reference check is to find out as much detailed information as possible about an applicant.

For example, if a reference says that an employee was, "just great," we would ask, "Can you give an example of a great performance." The emphasis is on behavior based interviewing.

Furthermore, we stay away, "Yes" or "No" questions. ESR will follow-up any "Yes" or "No’ response with a request for specific information. All our questions about job performance are opened ended to encourage comments and discussion.

To have ESR perform reference checks, a copy of the applicant's signed release, and resume or application is needed. It is recommended that the application form contain the names of supervisors, mangers or co-workers that can be contacted. It is also very important is to have the full name of the previous employer and either the phone number or enough information in order to allow a researcher to locate a phone number. A great part of the time it takes to do a reference check is simply locating the company and phone number.   

At ESR, the following steps are taken in our reference-checking program:

At the initial intake, we carefully note whether ESR has both received a signed release and whether ESR can contact the current employer or not. Contacting a current employer can have serious repercussions;

All questions are strictly job related, are approved by our in-house legal department, and are consistent with the Pre-Employment Inquiry Guidelines published by the California Department of Fair Employment and Housing;

In an attempt to guard against a fake reference, ESR will independently verify the phone number given for former employers when appropriate to ensure that it is a phone number to an existing company. Although fake references are rare, it is something that a professional background firm must guard against;

Where the application is not written clearly, or insufficient information is given, ESR will normally contact the applicant for clarification;

ESR will use various databases to locate the former employers. Even if the business is no longer operating, ESR will attempt to track down someone who can verify employment, usually by running public records and trying to find the name of an officer of the corporation;

ESR will track the status of each applicant to make sure that calls are completed;

ESR will make multiple attempts to obtain a reference. To maximize getting returned phone calls, ESR will normally fax a request for information immediately if the first call does not get a response. ESR will make multiple calls to obtain the information;

Where the employer uses a 900 service, ESR will contact the 900 number. Where the employer only does verifications by mail, ESR will mail the request along with a copy of the release:

ESR will first attempt to contact a supervisor, manager or co-worker if provided with that information. After that, ESR will contact Human Resources or Personnel to verify basic information such as stop and start date and job title;

ESR will also ask customized questions requested by our client that may pertain to a specific job or industry; and

All information is reported back in a written report, normally within four (4) business days.

All services by an outside agency are governed by the Fair Credit Reporting Act (FCRA). An applicant must sign a release and disclosure as well as other requirements. See the ESR special report on, "Complying with the FCRA in Four Easy Steps."

Obviously, ESR cannot guarantee a successful reference for each applicant. Where a company has a policy of "no comment," ESR will only be able to verify dates of employment and job title. Other potential problems occur when a company goes out of business (although ESR will attempt to track down the owners to obtain the reference). In addition, ESR has a strict policy of not contacting a current employer without explicit permission.

9. In person interviews for highly sensitive positions

When the position being filled is highly sensitive, or is an important executive position in the company, then ESR recommends that the reference checks be conducted in person. For these high level executive backgrounds, interviews should be conducted in person with former co-workers, family, neighbors and friends.

In addition to interviewing the references that were supplied by the applicant, ESR recommends that interviews be conducted with "developed" references. These are individuals who are identified during the interviews with the references supplied by the applicant. These are often the most important interviews in doing a background check.

In performing such interviews, ESR normally recommends that they be conducted by a licensed private investigator. ESR can recommend investigators with substantial law enforcement experience to assist in the process.

Please contact Employment Screening Resources (ESR) on the ESR website at http://www.esrcheck.com/, the ESR Contact page at http://www.esrcheck.com/contact.php, or by calling ESR at 415-898-0044 or Toll Free at 888-999-4474 to answer any questions or receive additional information concerning our reference checking services.
 

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