This newsletter is sent to clients of Employment Screening Resources (ESR), as well as employers, Human Resources and Security professionals, and law firms who require information on pre-employment screening, safe hiring, the FCRA and legal compliance. If this was sent in error, you can be removed from this mailing by using the “remove” feature at the end of the newsletter.

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April 2006 Vol. 6, No. 4

Employment Screening Resources (ESR) Newsletter and Legal Update

1. New Survey: Average Cost of Bad Hire 2 Times Salary of Worker Being Replaced

2. Law Firms Face Special Issues in the Use of Background Reports and Credit Checks

3. ID Theft Expert Underscores Importance of Adverse Action Notices to Applicants With a Negative Background Report

4. ESR Announcements and Seminars

1. New Survey: Average Cost of Bad Hire 2 Times Salary of Worker Being Replaced

A new survey has confirmed what every employer and HR professional already knows; it is very costly to make a bad hiring decisions.

According to news reports, Right Management, a division of Manpower Inc (NYSE: MAN), released a study in April, 2006 consisting of a survey of 444 organizations and businesses in the United States.

Significant findings included that the average cost of replacing a bad hire is 2 times the salary of the person being replaced, including recruitment, severance, and lost productivity.

Other costs can include lost customers and market share and higher training costs.

The bottom-line: Each hire is not only a big investment for each employer, but a big source of risk if something goes wrong. The cost and time of making good hiring decisions is small compared to the fallout from a bad decision. Pre-employment screening is certainly one of the critical tools an employer can utilize.

2. Law Firms Face Special Issues in the Use of Background Reports and Credit Checks

According to a special report by ESR, law firms face unique risks when it comes to issues surrounding pre-employment background screening. Some of the special concerns for law firms include:

  • Credit Reports—Although credit reports can be a legitimate hiring tool for certain positions in a law firm, a law firm must ensure that employment credit reports are not obtained from a screening firm for litigation purposes. Credit reports are covered by the federal Fair Credit Reporting Act (FCRA), and federal courts have held that a law firm which pulls a credit report for litigation can be in violation of the FCRA.
  • Following Legal Procedures—If a law firm fails to follow both federal and state laws concerning background checks, a law firm can face the risk of litigation since law firm applicants may be especially knowledgeable of the technical legal requirements associated with background checks. A California law firm discovered that the hard way in a 2005 case where they were sued by a paralegal for a technical legal violation of the California Investigative Consumer Reporting Agencies Act (ICRA). Although the law firm ultimately won the case, the lawsuit underscores that a law firm must be especially careful to follow the law.
  • Failure to Screen Lawyers—Many law firms make the mistake of only screening staff members and not attorneys, under the assumption that an attorney could not have a disqualifying record and still be an attorney. In the medical field, health care providers have made the same mistake about doctors. It is very possible for a licensed professional to have a negative item in their background, but still have a valid license. This can occur, for example, if the professional moves out of state before the matter is resolved or the matter is still under investigation by the licensing board. The most problematic situation is where a professional is hired as a lateral transfer, as opposed to an attorney who is newly admitted.

For an ESR Special Report on issues involving law firms and safe hiring, please contact attorney Vince Pascarella, a member of the Colorado bar and the Director of Legal Compliance at ESR. His contact information is: 415-898-0044 Ext. 241/ [email protected]

3. ID Theft Expert Underscores Importance of Adverse Action Notices to Applicants With a Negative Background Report

A national expert on identity theft underscored the importance of employers following the adverse action rules when dealing with job applicants who are turned down due to negative background reports.

Jay Foley, co-director of the ID Theft Center (,

spoke on the importance of giving job applicants a chance to clear up any negative information in a background report. This was part of a panel discussion on privacy and background reports moderated by ESR President, Lester Rosen, at the recent annual conference in Nashville, Tennessee on April 2-5, 2006, of the National Association of Professional Background Screeners (NAPBS), the national professional association for the background screening industry.

Recognizing that background reports are extremely valuable to protect people from harm, Mr. Foley also gave dramatic examples of how negative information can also be the result of someone committing a crime while using a stolen identity. When that occurs, an innocent person can be wrongly reported as being a criminal, when in fact they were the victim of ID theft.

By following the Adverse Action notification requirements of the FCRA, employers can give job applicants who were the victim of criminal ID theft an opportunity to correct the record. Otherwise, a victim of ID theft would be further victimized because they may not know they were being denied a job due to criminal ID theft. Employers would also lose a potentially good candidate.

Under section 604 of the federal Fair Credit Reporting Act (FCRA), when an employer receives a background report, and intends not to hire the applicant based upon the report in any way, the applicant has certain rights. Before taking the adverse action, the employer must provide the applicant with a copy of the consumer report and a document prepared by the Federal Trade Commission (FTC) entitled “A Summary of Your Rights Under the Fair Credit Reporting Act.” (This should be provided by the screening service.)

The purpose is to give an applicant the opportunity to see the report that contains the information that is being used against them. If the report is inaccurate or incomplete, the applicant then has the opportunity to contact the Consumer Reporting Agency (background screening firm) to dispute or explain what is in the report. Otherwise, applicants may be denied employment without ever knowing they were the victims of inaccurate or incomplete data. If the employer determines that the decision is final, an additional notice is necessary under FCRA Section 615.

For more information on how to comply with the FCRA and copies of sample pre-adverse action and post adverse action letters, see the ESR Special Report, “The FCRA in Four Easy Steps for Employers.”

4. ESR Announcements and Seminars

  • ESR announces the Safe Hiring Certification Training, an intensive 30 Hour online educational and professional development course designed for employers, human resource and security professionals, and anyone responsible for Risk Management and Due Diligence in hiring.
    • Convenient 24/7/365 availability through any online connection
    • 21 self-paced lessons on Safe Hiring practices
    • A printable, 190-page workbook to facilitate note-taking and preparation for review quizzes
    • Review quizzes after each lesson featuring more than 300 questions about Safe Hiring
    • Easy access to useful Safe Hiring web-links
    • Sample Safe Hiring forms to help guide your own form development
    • Industry certification in Safe Hiring
    • Additional audio pointers by author Les Rosen (requires speakers but not a requirement for course completion)
  • The Safe Hiring Certification Training is a self-paced, on-line course that can be accessed at any time from anywhere, including at work. Features of this course include:

    Through this course, participants will obtain the knowledge and skills necessary to implement and manage a legal and effective Safe Hiring program including employment screening background checks. Upon successful completion, participants will receive a Certificate of Completion, marking a significant professional accomplishment. The course is offered at no charge to ESR clients.

    The course is available at

    More information is available at:

  • ESR wrote the book on background checks! – The Safe Hiring Manual, now in its third printing, is available from BRB Publications. Click here to read more. The definitive book on pre-employment screening, “The Safe Hiring Manual-The Complete Guide to Keeping Criminals, Terrorists and Imposters out of Your Workplace,” has undergone its third printing since its introduction a year ago. The new printing also contains updates and new material.

ESR is pleased to participate in the following seminars across the United States, including three nationwide SHRM Conference: the SHRM National Conference, the SHRM EMA Conference and the Global Screening Conference.

Current 2006 Spring/Summer Schedule 

April 27, 2006–National Web conference-“Avoid Negligent Hiring-Best Practices and Legal Compliance,” sponsored by the Northern California Human Resources Association (NCHRA)

May 11, 2006–Alameda, CA- “Ask a Lawyer – Everything you Wanted to Know About Background Checks But Were Afraid to Ask.” East Bay District CALI meeting

May 16–Milpitas, CA “Avoid Negligent Hiring.” Pre-employment Background Screening Trends, Legal Developments and Best Practices For more details, see

June 20, 2006–Atherton, CA “Avoid Negligent Hiring.” Pre-employment Background Screening Trends, Legal Developments and Best Practices For more details, see

June 27/28, 2006–Washington, D.C. “Avoid Negligent Hiring-Best Practices and Legal Compliance,” SHRM 58th Annual Conference & Exposition

July 27, 2006–Kennedy Information National Audio Conference on, “Background Checks and Recruiting — Avoiding Negligent Hiring.” (Details to be posted)

November 13, 2006 –Tampa, FL-Keynote address at the Annual Pre-Employment Screeners Conference (Intended for background firms and record retrievers) ” The Top Ten Ways for a Screening Firm to Be Sued Out of Existence by Employers and Consumers” See:

Contact ESR for further details.

Employment Screening Resources (ESR)  

1620 Grant Avenue, Suite 7 

Novato, CA 94945


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