LARRY BESNOFF and ARTHUR J. COHEN

Two years ago, an employee of a Cape Cod, Mass., trash-hauling firm was charged with murder in the 2002 stabbing death of a fashion writer. Although the employee had a lengthy criminal history in Florida, no background check had been performed for that jurisdiction. Had the public records been checked, it is possible that the employee would not have been hired and thereby not put in a position where the murder could be committed. In addition, the employer would not have been exposed to a claim of negligent hiring and the damages that resulted.

In another strange case, the chairman of Smith & Wesson, the nation's second largest gun manufacturer, resigned after it was discovered he had been imprisoned for armed robbery and an attempted prison escape. One local paper reported he was known for carrying a sawed off 16-gauge shotgun (not a Smith & Wesson product, although that probably would not have made a difference). A criminal background check might have prevented this corporate embarrassment.

While these cases might seem to be the exception, they illustrate the serious consequences of a weak pre-employment background screening process, and show why diligent screening makes good business sense. It can save a company money arising from third party claims, which helps eliminate potential embarrassment and protect the value of a public company's stock.

Increasingly, management, including supervisors, are being held liable for the acts of their employees, and multimillion-dollar jury verdicts are attracting the attention of employers. These negligent hire/retention cases are on the rise and can be more costly than discrimination and other types of employee-related litigation.

In the past, most lawsuits were brought by employees who were not hired or promoted, or were discharged. New negligent hire actions are increasingly being instituted by employees and by innocent third parties, such as customers, who have been injured by the criminal, violent or negligent acts of an employee. These costly causes of action are the result of employees who should not have been hired in the first place, who should not have been retained if hired or who should not have been placed in certain positions.

In one negligent hiring case filed against a non-profit corporation, the plaintiff rejected a settlement offer of $500,000. The jury verdict was $5 million. And, most important from the employer's perspective, supervisors are being held personally liable for the acts of their employees.

However, there are protective steps that can be taken. To shield yourself and your company, you need to understand how much pre-employment screening is considered sufficient by the courts.

Negligent Hiring Cases

The typical negligent hiring case involves an intentional tort — a deliberate inflicting of harm — committed by an employee. Some intentional torts are fraud, assault, battery and interference with contractual relations.

Any employment decision could result in a negligent hire or retention lawsuit. Recruitment, hiring, applicant screening, drug testing, performance evaluations, employee assistance programs, non-compete provisions and post-employment references all are potential areas of potential legal vulnerability.

Generally, in cases won by the plaintiff, the employer is found to have improperly checked the qualifications of an applicant prior to hiring. The question presented to the jury is: Did the employer know or should the employer have known that the employee posed a risk to others? The duty of the employer is to exercise reasonable care to ensure that workers and customers are free from the risk of harm that may be inflicted by unfit employees.

Cases are evaluated on three factors:

In the case of Burch vs. A&G Associates, for example, a Michigan taxi driver took a passenger to the desired location and received the correct fare. However, the passenger did not tip the driver. The taxi driver then assaulted the passenger with an iron bar and stole his pants. The taxi driver was later convicted in state court of criminal assault.

The customer sued the taxi driver's employer for negligent hiring. The employer's motion to dismiss was denied, and the court held that if the customer could prove that the employer failed to properly investigate the driver's fitness to see if he was dangerous before he was hired, the employer could be held civilly responsible for the assault.

Under the legal theory of respondeat superior, an employer only would be responsible for actions performed within the scope and course of an individual's employment. But, under the negligent hire theory, an employer can be liable for acts that occur outside the scope of an individual's employment. For example, in DiCosala vs. Kay, a Boy Scout camp in New Jersey was found liable for negligent hiring when a boy was injured by a gun belonging to a ranger hired by the camp. The court noted that the camp director knew or had reason to know that there was a dangerous weapon at the facility. Obviously, it was not within the scope or course of the ranger's performance of his duties to have a loaded gun on the premises.

Another troubling aspect of the negligent hire theory is that an employer can be liable even if the act occurs away from the worksite. In Gaines vs. Monsanto, a mailroom clerk followed a female secretary to her home and killed her there. The mailroom clerk was later convicted of murder in Missouri state court.

The parents of the deceased secretary sued Monsanto when it was discovered that the mailroom clerk had been convicted of rape and robbery prior to his employment. Central to the court's decision to reject the employer's motion to dismiss was the fact that the mailroom clerk had been assigned duties that gave him access to the home address of the secretary.

Further, the mailroom clerk had made advances toward the secretary and had a reputation at the company for harassing and making advances toward other female employees. The court found that it was reasonably foreseeable that an individual with that background would have caused the injuries sustained. Therefore, the court ruled that the case would be decided by a jury.

Difficulty in obtaining information about an employee is apparently not a concern of plaintiffs or juries. In a recent case from Pennsylvania, a young man was hired to perform maintenance work for a nursing home. He was recommended by another employee and appeared to have the necessary skills. He was a teenager so there was no prior employment listed on his application form. The employer did not check personal references.

Approximately three months after being hired, the young man assaulted and raped a female employee on the premises. He was later convicted for the crime.

The victim filed a negligent hire lawsuit in state court based on the fact that the maintenance worker had a discipline record at high school and a juvenile criminal record for attacking a woman. There was no way for the employer to discover these privileged records.

After the Hire

Besides the issue of hiring, employers must ascertain whether an employee is suitable for each new job he or she is assigned to perform once on the payroll. In Williams vs. Feather Sound, Inc., for instance, a man was hired to perform yard work outside a residential building in Florida. The employer never checked the references or former employers listed on the application form.

Three weeks later, the man was transferred to work inside the building. He used his pass key to gain entrance to an apartment and assaulted a resident. It then came to light that the man had a previous conviction for breaking and entering as well as assault with intent to murder in the second degree.

Reviewing the resulting lawsuit for negligent retention, the court found that had the employee continued to work outside the building, the possibility of intimate contact with residents would have been low. Therefore, there was no need at that point for the employer to have made an independent inquiry into the employee's past work experiences.

However, the court found that once the employee was transferred to work inside the building and had received a pass key, the employer had a duty to reasonably inquire into his background. If the background proved to be suspect, then a criminal record check was in order.

This case raises the question: How much checking is enough? Should an employer check criminal references in every case?

A similar case is Ponticas vs. KMS Investments, where a Minnesota apartment manager was hired and given a pass key. The employer performed the following employment checks:

The state court jury verdict for the plaintiff on a claim of negligent hiring and/or retention resulted after the employee sexually assaulted a female tenant. The apartment manager's criminal record included convictions for burglary, receiving stolen property and armed robbery. He was fired from a previous job for drinking. The court found there was sufficient evidence on the record to justify the jury verdict because the employer had failed to:

All of the above might have disclosed criminal activity or raised questions to justify a criminal check. The court noted that there is no automatic obligation for an employer to check a criminal record. However, receipt of information showing large gaps in employment was suggestive of problems that needed to be investigated further.

The amount of checking necessary by an employer depends on the nature of the job. In Evans vs. Morsell, a bartender was hired after the Maryland employer had asked another bar owner about the bartender and had received a recommendation that he was a good worker and a person whom the employer should hire.

The employer had no knowledge of any prior criminal record. When the bartender later shot a customer, the customer sued for negligent retention. The state court found that the employer was not responsible because there were no facts to put the owner on notice that the bartender was unfit or dangerous.

To shield themselves and their employers, managers need to know what kind of background check is needed for each position within their departments.

Recommended Steps

Based on these cases and others, employers and their managers can take steps to protect themselves from these vexing and potentially costly lawsuits. Following are some suggestions:

As with other areas of potential employer liability, having a plan, understanding your obligations as a supervisor under the law and maintaining uniform procedures are the best ways to prevent negligent hiring/retention lawsuits.

Larry Besnoff is a partner with Obermayer Rebmann Maxwell & Hippel LLC, a law firm with offices in Pennsylvania, New Jersey and Delaware. He represents employers in labor and employment matters. Arthur J. Cohen is general counsel for Philadelphia-based Concorde Inc., a provider of employment screening services.

Want to hear more on this subject?

Larry Besnoff and Arthur J. Cohen, the authors of this article, will be speaking in the “Don't Hire a Crook” session at WasteExpo on Monday, May 7. The session, part of the Business and Employment Track, will run from 10:30 a.m. to 11:45 a.m.