Employers’ Practical Exposure to Negligent Hiring Liability - PowerPoint Presentation

Employers’ Practical Exposure to Negligent Hiring Liability     Benefits from Reduced Turnover Save Many More Dollars   Than the Cost to Employers to Defend Claims       Ray P. McClain   Director, Employment Discrimination Project   Lawyers’ Committee for Civil Rights Under Law   Prepared for Chicago Fair Hiring Summit   October 26, 2015     © 2015 Lawyers’ Committee for Civil Rights Under Law  

How much can Employers Benefit from Hiring Workers with Criminal Records?     Employers Who Hire Workers with Criminal Records Report Lower Turnover   A 2012 report surveying two dozen scholarly studies of cost of replacing employees estimated the Cost of Replacing Workers at different levels of skill and responsibility Based on those figures, if Hiring Workers with Criminal History Can Reduce Turnover Just 11%   ( 1) For High-turnover, Low-wage Entry Level Jobs, Employer will save about $370 per Worker hired with a Criminal History   ( 2) For Hiring Assistant Managers Paid $40,000/year, Employer will save an average of $875 per new hire   The savings include many types of costs:   Hiring Manager time selecting new employees HR staff time on-boarding new employees and cost of orientation materials Training staff time and other formal training costs Supervisor time for on-the-job training of new employees Supervisor and experienced co-worker time mentoring new employees Lower Productivity of new employees until they master job duties

Practically, what does an employer risk by hiring a worker with a conviction?     The financial risks are real, but if the Employer puts asides exaggerations about risk and compares real risks to the real potential benefits, the company is likely to find there are substantial financial benefits compared to very little risk   First : Employers are not Likely to be Found Liable — Why Not?     ( 1) Studies by the Bureau of Justice Statistics indicate that very few serious crimes are committed in the workplace by any employees   ( 2) Employer is seen as a victim, too , unless it has been reckless and irresponsible   ( 3) Judges don ’t like to impose liability on anyone for the personally motivated criminal conduct of someone else; if the employer did a background check , trial judges typically dismiss the case without a trial   ( 4) Juries don ’t like to impose liability for the personally motivated criminal conduct of someone else; when cases go to trial, juries rarely find for the injured party.  

Second: Employers are Not Even Likely to be Sued — Why Not?   Because the cases where employers have to pay have all of these factors:   (1) Victim suffered catastrophic harm Sexual Assault Death or Permanent Disfigurement or Disability ( 2) Employer admitted not screening applicants Usually no criminal history check at all ( 3) Special risks of the job Unsupervised access to minors Elderly, senile or other vulnerable clients Employee in property management has access to master keys to apartments Employer sends the worker into the customer’s home ( Appliance or home repairs; furniture delivery; door to door sales) ( 4) Management failures No internal checks on access to residences Failure to respond to complaints about the employee’s behavior ( 5) Notice of the particular harm the victim suffered was clear Based on the nature, number and recency of prior convictions ( 6) Connection to the employment Usually on employer’s premises At the home/apartment where the employment gave the access to the employee

In any year, the risk that an Employer will even be sued is only about one lawsuit for every 10,000 workers with a prior felony conviction .   The Lawyers ’ Committee coordinated a survey of all the legal decisions reported in cases raising “negligent hiring liability” issues for a 10-year period in 21 of the most populous states   We counted all the cases involving negligence with respect to criminal background: only about one eighth of the cases met these criteria :   Employee had a prior criminal record (not counting vehicle operation) Employee committed a crime that harmed a victim The victim or family filed a lawsuit The suit claimed that the Employer acted negligently in hiring the employee for the job that put him in contact with the victim because the employee had a prior criminal record   We did not count many cases of “negligent hiring” that alleged other types of negligent acts:   Employee negligently operated a vehicle that injured the victim Employee sexually harassed or sexually assaulted the victim(s), but no prior convictions were alleged and negligence was based on failure to investigate prior reports of sexual misconduct, never prosecuted  

States surveyed for reported lawsuits for Negligent Hiring, 2002-2011 States surveyed contained over 70% of the U.S. population in the 2010 Census

Estimating average cost of defense per worker hired with a conviction = $5   400 lawsuits filed each year for negligently hiring a person with a conviction   10-year survey included all officially and unofficially reported cases in federal district courts and all appeals courts in each State Fewer than 30 reported cases in 10 years filed for Negligent Hiring based on prior conviction States surveyed covered 70% of national population; this implied 40 cases in 10 years for entire population, 4 per year The estimate assumes that only 1% of cases filed in court are resolved by reported opinion = 400 cases filed per year   4,000,000 active workers, or many more, have prior felony convictions   Criminologists and economists have estimated that there were 12.5 Million adults with a felony conviction in the nation in 2008 if only one third of these adults is employed, then there are more than 4 Million active workers who have a felony conviction   Even for big employers with large deductibles (e.g., $50,000 per claim), average cost of defense expected with hiring one worker with a prior felony conviction is only $ 5 per hire 400 cases per year/4,000,000 = 1 case filed for every 10,000 workers

What about other costs?   Risk of Adverse Result: Managed by insurance coverage - like any risk of negligence liability Recent experience of Management Lawyers will confirm that the amounts of pay-outs in the few cases where payments are made for settlements or judgments are occasionally substantial, but rarely happen Magnitude of risk even for insurance companies for pay-out was greatly exaggerated — independent HR consultants confused a report on verdicts/settlements in premises liability cases (not a set of cases for Negligently Hiring an employee with a prior conviction), and their inaccurate webpage reference was carelessly repeated, first in an article by business school professors, then by many consultants and organizations who wanted to extend the use of background checks for a variety of reasons   Risk to Brand reputation:   Employers cite few, if any examples of persisting, long-term damage to brand, even from one of the catastrophic losses that do occur from time to time An employee hire that goes spectacularly bad is embarrassing to the hiring manager, and without support for the hire from upper management the hiring manager could be blamed, but there are few examples of persistent damage to the company as a whole

Measures to reduce further employer risk of being sued for Negligently Hiring a worker who has a prior conviction: Certificates of Relief/Restoration of Rights Uniform Collateral Consequences of Conviction Act Offers Some Protection   The Uniform Act provides that a Certificate of Restoration of Rights awarded to a worker can be offered as evidence of the employer’s due care in hiring an employee who harmed someone   States that have enacted some statute similar to this provision protecting employers: Arizona , California, Connecticut, Illinois, Kansas, Louisiana, Massachusetts, Nevada , New Jersey, New York, North Carolina and Ohio and Vermont Six states provide qualified immunity if criminal history is sole evidence of negligence : Kansas , Louisiana, Massachusetts, New York, North Carolina and Ohio   North Carolina has strongest provision: if the hiring employer knew that the applicant had obtained a Certificate of Relief under the North Carolina version of the Act, N.C.G.S.A. §15A-173:   In a judicial proceeding alleging negligence, a Certificate of Relief is a bar to any action alleging lack of due care in hiring or retaining the individual to whom the Certificate of Relief was issued.