As Lawsuits Rise, Companies Use Detectives to Cull Job Applicants

Hiring a job candidate used to be a fairly simple process. Look over the application, call one or two references, and make a decision.

Today it's not so simple.

Driven by costly lawsuits and a sharp rise in workplace violence, personnel departments are turning increasingly to detective-style background checks as a standard part of the hiring process.

Already, services that test the personalities of job candidates and detail their criminal, credit, and employment background are growing by as much as 30 percent a year, say companies in the field.

Why the rush toward such investigations and tests? Experts cite several reasons:

*Businesses lose more than $120 billion annually from workplace theft, finds a study by the National Safe Workplace Institute.

*Workplace homicides have risen nearly tenfold in a decade. Murder is the second highest cause of on-the-job fatalities, and disgruntled co-workers or clients account for 10 percent of such homicides, according to the Bureau of Labor Statistics.

*Ten to 30 percent of job applicants lie about their past, say background-check providers.

*Many companies hire workers who turn out to be poorly suited for their jobs. This is a driving factor behind a rise in personality tests at some firms.

*Companies today find it maddeningly difficult to secure detailed references on workers.

"The trend among employers has been not to give anything but name, rank, and serial number," says Sharon Horrigan, manager of state legislative affairs for the Society for Human Resource Management in Alexandria, Va. "There is a fear among employers because of our increasingly litigious society."

By sifting criminal records alone, companies can cull out from 4 percent to 20 percent of the candidates in an applicant pool, says Fred Giles, an executive at Pinkerton's Inc. in Charlotte, N.C.

Pinkerton, which performed more than 1 million checks last year, has seen a sudden surge in inquiries since a recent California court decision. Its background-investigation business is growing at 30 percent a year. Other companies report similar growth.

The firms sift through several mounds of data: criminal, employment, credit, driving, and education records.

The companies also offer psychological tests gauging a person's integrity, drive, commitment to customer service, and other relevant workplace traits.

Such vetting can impinge on a candidate's civil rights, even when it requires the applicant's signed approval, the ACLU maintains. For example, firms that compile credit data fail to systematically weed out inaccurate information. So some people might find their job opportunities hobbled by a faulty credit rating.

"You could work hard for 20 years and do an exemplary job and then have your career come crashing down because some test or some false data makes a mistake - and all your years of hard work mean nothing," says Lewis Maltby, director of the workplace rights project at the American Civil Liberties Union (ACLU) in New York.

Investigation companies express confidence in their data and say federal laws offer protection against false information.

Meanwhile, state lawmakers have been rushing to try to make it easier for employers to provide job references. Twenty-six states have passed laws to protect companies from defamation suits, with all but four enacting the bills since 1995. Ten other states are considering similar measures. Some of the laws require job searchers to sign off on requests for references.

Many of the laws are so new they have not yet fully reassured employers about the protections on reference checks, Ms. Horrigan says.

And employers face a growing threat of litigation from another angle: For not revealing negative experiences that tip off a future employer to risks.

On Jan. 27, the the California Supreme Court ruled that a former employer is liable for providing a positive reference that fails to mention allegations of sexual misconduct. The court supported a suit brought by a teenager against three school districts that strongly recommended a man for the job as vice principal at her school and failed to mention the allegations. The vice principal has pleaded guilty to unlawful touching of a minor.

The ruling comes on top of a similar case involving Allstate Corp., settled out of court, in which a former employee shot five co-workers in 1993 at the cafeteria of his new employer, Fireman's Fund Insurance Company.

"Employers keep looking for some way that they can stay out of trouble without telling the truth," says Mr. Maltby of the ACLU. "The bottom line of the California case is you have to tell the truth, positive or negative."

But the implications of such rulings and state laws will take time to sort out.

The California decision does not require an employer to disclose all negative information - only experiences that signal potential physical risk.

Still, some experts say the ruling's real message is not to say anything at all. Already, as many as half of the nation's large employers provide only name, position, and dates of employment.

Until former employers are candid, experts say the business in pre-employment investigations will probably flourish.