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Excerpt--Legal, Effective References

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By Wendy Bliss, J.D., SPHR

2001, 132 pages, Paperback

ISBN: 978-1-58644-010-7

SHRMStore Item #: 61.14531

Order from the SHRMStore or call (800) 444-5006

Reference Checking in Today's Workplace

Reference checking is an important, but often frustrating, aspect of the hiring process. If done well, the reference-checking process helps employers both in screening "in" qualified candidates who are good fits for the job and the organization and in screening "out" incompetent or otherwise unsuitable individuals.

Most organizations check references and allocate significant resources to this activity. A 1998 survey by the Society for Human Resource Management (SHRM) found that more than 80% of employers polled con- duct reference checks regularly for professional, executive, administrative, and technical positions. In addition, according to a study of employment managers at Fortune 500 companies, approximately 10% of the time devoted to staffing is spent on reference checking.5 Outsourcing may alleviate the frustrations of the process, but at a price. It may cost from as little as $10 to more than $100 per reference requested for each candidate, depending on the nature and extent of the reference check and the report provided.

In spite of the time and money spent on checking references, employers often experience difficulty in gathering more than "bare-bones" information about an applicant's track record. The findings of the 1998 SHRM reference-checking survey clearly illustrate this problem. This study revealed that while 91% of respondent employers were regularly able to obtain adequate information from former employers about candidates' dates of employment, less than one-third of these employers were regularly able to obtain sufficient information about candidates' qualifications, work habits, and reasons for leaving. Only 5% of employers in the SHRM survey could regularly obtain adequate information about candidates' violent or bizarre behaviors.

Reference-Checking Challenges and Opportunities

Employers face distinct challenges in getting and giving references, but have the potential to create distinct advantages with effective practices. Three key employer objectives in obtaining references are: 1) verifying information; 2) protecting the organization and its employees; and 3) avoiding legal problems associated with poor hiring decisions. Meeting these objectives will enable an employer to hire the best candidates, avoid hiring disasters, reduce costs, and increase productivity.

Verify Truth of Applicant Statements

In an ideal world, reference checking would be unnecessary because employers could rely on all statements made by applicants in resumes, employment applications, and interviews. In the real world, employers proceed at their peril if they fail to confirm what applicants tell them. The magnitude of deception that occurs during the hiring process is staggering. Numerous studies report that 25% to 40% of applicants provide false, exaggerated, or misleading information about their qualifications or backgrounds. One survey by Reid Psychological Systems even found that 95% of college students polled would fie to get a job, and that 41% of those students had already done so.

Reduce the Risk of Legal Liability

Employers run the risk of lawsuits for negligent hiring if they fail to exercise reasonable care in investigating an applicant's background, and as a result, hire an unsuitable individual who harms others in a way that was foreseeable based on that person's background. These lawsuits can be quite costly. The average settlement in lawsuits for negligent hiring exceeds $1.6 million, according to American Background Information Services, Inc.; even larger awards are possible.

One of the ironic aspects of reference checking is that human resource professionals and managers -- the very people usually tasked with the job of checking references -- seem to spend as much effort in not giving in-depth responses to reference requests about former employees as they do in attempting to get useful references for their own hiring decisions. The "silence is golden" approach to providing references has definitely triumphed over an "available on request" philosophy. Why? Because litigation anxiety is alive and well in the reference-checking arena. According to the 1998 SHRM reference-checking study, 45% of employers have refused to provide information about former employees in response to reference requests for fear of being sued.

But is silence really golden? Consider the following benefits that can result from employers providing such information:

  • Company outplacement programs are more effective when productive former employees' job search efforts are supported by in-depth references.
  • Unemployment insurance premiums are reduced because the sooner unemployed former workers can find another job, the lower the former employer's unemployment tax rate will be.
  • Former employees whose performance was good are rewarded with favorable references.
  • Current employees understand that there are long-term rewards for strong performance and good conduct.
  • Other employers are alerted to potential employees who have documented poor performance, misconduct, or other problem behaviors.

Before throwing their hands up in despair at the futility of getting complete and accurate references or establishing a strictly "name, rank, and serial number" policy for giving references, employers should thoroughly examine the legal issues on both sides of the reference-checking equation. With a full understanding of these issues, employers can develop reference-check policies and procedures that will minimize exposure to lawsuits and maximize benefits to the organization.

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