Demonstrated due diligence is your first line of defense against negligent hiring and retention lawsuits. Sometimes this is easier said than done, especially if you are trying to fill positions for which there is a lack of talent.
Be aware that dialing down the due diligence in making a hiring decision can backfire with exorbitant cost. In one case, a jury awarded $7 million to the family of a truck driver who was killed in an accident caused by a second truck driver. The second driver, who was hired without a background check, had been on the job only 19 days when the accident happened. The plaintiff was able to show that a background check would have revealed that the second driver had had his license revoked twice for driving infractions.
In another more recent case, a hospital in Denver was sued for negligent hiring in a class action suit because it had hired a surgical technician with a record of having been fired from four previous positions, and who also had a Navy court martial for the theft of the powerful synthetic opioid, fentanyl. After being caught again stealing a syringe of fentanyl, the defendant tested positive for a blood-borne disease, making him an infection risk to the 2,900 surgical patients the hospital had during his tenure. Plaintiffs counsel argued that the terminations and court martial were easily discovered with a background check. All 2,900 patients are part of the class action lawsuit.
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There have been concerns and debates over the accuracy and validity of polygraph results, written honesty tests, psychological testing, etc. over the years and it will undoubtedly continue. One issue surrounding the controversy is the fact that individual results often times cannot be substantiated without corroborating admissions by the applicant. Further, a number of applicants have been denied employment due to having scored unfavorably on such testing, which has caused opponents to voice their concerns resulting in various acts of legislation. … Continue reading
A comprehensive Enterprise Risk Management (ERM) strategy can help protect your reputation by preventing events that damage it.
Reputation is an intangible asset. Much research and many seasoned observers agree that a good reputation enhances customer loyalty and purchase behavior, market value of the business, hiring and retention success, and brand image. Many of these factors are reflected in the asset we call “goodwill.”
Managing Reputational Risk in ERM
Reputational risk (or ‘reputation risk’) is one of the costs of events such as adverse actions for negligent hiring or publicized high-level fraud. Events like these are precisely the types of risky outcomes that your systematic ERM strategy aims to identify, evaluate, and mitigate. We do not have space to provide an exhaustive list of reputational risks, but we can illustrate the point that preventing selected negative outcomes can help protect your reputation, not to mention your bottom line.
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“Almost everything that can go wrong in a business has a human capital component.” This quote from David Creelman of Creelman Research points out the critical importance of managing human capital risks. Often, risks associated with human actions are given only cursory attention until “something bad happens”. Unfortunately, when one of these risks contributes to a loss, it can be very costly in terms of brand, reputation, morale, or revenue.
Human capital risks commonly stem from these five critical areas:
- Occupational fraud
- Catastrophic workplace events
- Negligent hiring or retention
This latest infographic summarizes each area and offers tips to help organizations better manage their human capital risks.
An employer is exposed to risk caused by the conduct of an employee whether or not such conduct is within the course and scope of the employee’s employment. Focusing your organization’s human capital risk mitigation measures on only one of these areas of potential exposure may be hazardous to the financial and reputational health of your organization.
Respondeat superior is a general legal liability doctrine that holds an employer responsible for a negligent act or omission of an employee acting within the course and scope of employment. This is a vicarious theory of liability, meaning there needn’t be a finding of any improper action by the employer. The reasonableness of an employer’s actions (e.g., its hiring, supervision and retention of an employee) is irrelevant and provides no basis for the avoidance of employer liability for the acts of an employee. However, in order for the employer to be found liable the complainant must prove the employee acted within the course and scope of employment. … Continue reading