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Employee theft and other forms of counter-productivity are critical factors in determining the success or failure of a carwash business. In fact, recently an owner converted his carwash, which was full service for over 30 years, to an express exterior wash due to problems stemming from employee theft. This theft involved removing money from vehicles, forging/hiding receipts, stealing merchandise and taking cash from the register.
Employee counter-productivity can also increase negligent hiring claims. Such claims arise when an employee commits an act of theft, negligence or violence against a customer or an employer. Rather than taking action against the employee, the harmed individual frequently sues the employer claiming that the business was negligent in hiring the employee, and such negligence was the cause of them being harmed. Claims often seek millions of dollars in damages, but can be successfully defeated if the employer has an effective hiring process in place.
This type of lawsuit is typified by a carwash patron’s recently published allegation that her car rear-ended the auto in front of it due to an employee’s inattentiveness. Subsequently, the car’s undercarriage allegedly detached on the freeway and caused harm to the driver. While there are a number of complaints that this patron might file, certainly negligent hiring would be a legitimate lawsuit in this situation.
This article will focus on the various ways carwashes can screen out job applicants who are likely to engage in workplace theft and other problematic behaviors. The advantages and disadvantages of each approach will be discussed, along with underlying legal issues. Based on an analysis of the various approaches to applicant screening, best practices for the carwash industry are recommended.
The size of the problem
Employers are not always aware of the frequency with which employees engage in theft, drug use and other counterproductive behaviors. The following research findings are helpful in providing an accurate perspective of how common these problematic behaviors occur:
- A study released in 2010 by the U.S. Substance Abuse and Mental Health Services Administration indicated that the rate of illegal drug use rose last year to the highest level in almost a decade.
- Recently a television station conducted a hidden camera investigation that discovered that workers frequently steal money and belongings from patrons’ cars. At one carwash location, they rolled 11 cars through and seven times money was removed by workers.
- A 2005 study by CareerBuilder.com found that 20 percent of workers lie at least once a week.
- A 2004 article in HR Magazine estimated that 40 to 70 percent of job applicants embellish or outright lie on their resumes.
- A survey by CCH found that the average cost of absenteeism in 2005 was $660 per employee. Significantly, almost two out of three employees who fail to show up for work are not physically ill.
- A 2005 study by Salary.com and AOL found that the average worker admits to wasting over two hours of work time per day. That is one week wasted during every month.
- The 2006 report by the Association of Certified Fraud Examiners showed that businesses with fewer than 100 employees suffered a median of $190,000 in fraud losses.
Clearly, prudent employers must take serious steps to address ethical issues when evaluating job applicants for employment. Some of the tools that are helpful to address these issues are reference checks, criminal background checks, interviews, drug testing and written integrity testing. The advantages and disadvantages of each of these tools are discussed in this article.
Reference checks are a very important part of any applicant screening process. They can document that the information provided by the applicant via resume and/or interview is truthful. The reference check is a mandatory step to help protect an employer against negligent hiring liability.
Unfortunately, reference checks are time consuming and costly to conduct. In addition, applicants’ previous employers often provide very little information for fear of defamation claims. Many younger applicants will not have any previous employment experience, which precludes gathering any insight from prior employers. Also, if an employer utilizes a third party to conduct reference checks, then the employer has to ensure that it is complying with the Fair Credit Reporting Act (FCRA), along with its many notice requirements.
Criminal background checks
Since past behavior is a good predictor of future behavior, criminal background checks can help determine whether a prospective employee will steal from an employer. If an applicant has a recent conviction for a theft-related crime, then it should be a legitimate and useful basis for denying employment. Also, conducting a criminal background check demonstrates that the employer is taking proper care in hiring employees, making such checks a useful defense in negligent hiring suits.
On the other hand, ADP’s 2007 Annual Screening Index indicates that only 5 percent of criminal background checks reveal a conviction. And of these convictions, many are not theft or job-related crimes. Since research and the general experience of employers consistently shows that about 25 percent of the workforce poses a significant counter-productivity risk, obviously a 5 percent or less rejection rate of job applicants doesn’t come close to eliminating problems.
Another problem with criminal background checks is that they exhibit a disparate impact on the basis of race. As a result, the Equal Employment Opportunity Commission (EEOC) has indicated that it will pay close attention to an employer’s rejection of applicants on the basis of criminal convictions. The EEOC has recently filed a complaint in the U.S. District Court in Maryland against Freeman Companies, a Dallas-based corporate event-planning company. The EEOC claims that Freeman’s use of criminal background checks discriminates against African American and Hispanic job applicants.
Another limitation to criminal background checks is their use with younger job applicants. In the vast majority of cases, no information regarding juvenile convictions will be provided, since juvenile records are typically sealed by the courts.
Finally, the vast majority of employers who utilize criminal background checks in the employment process use a third party to get that information. Use of a third party requires that the employer comply with the FCRA. Employers must be very careful about which third party they use to help ensure that the criminal background information they receive is free of errors and omissions.
According to the Society for Human Resources Management, up to 60 percent of employers use credit checks to help assess the trustworthiness of their job applicants. Even though conducting credit checks is a common practice, there is little concrete evidence to prove their effectiveness in screening job applicants.
Additionally, both federal and state legislatures have expressed concern about this practice. As documented by an October 21, 2010 article in the Wall Street Journal, credit checks are coming under fire from legislators particularly in light of the bad economy and its impact on people’s credit. To date, a handful of states (e.g., Illinois, Washington, Hawaii and Oregon) have enacted laws that specifically restrict an employer’s use of credit checks, with similar measures being recently introduced in many other states and the U.S. Congress.
Also, like criminal background checks, they tend to exhibit disparate impact (on the basis of race and gender). Also, the use of credit checks requires strict compliance with the FCRA and younger job applicants may not have any credit information available.
Interviews are a standard piece of the hiring processes and can be very useful when conducted by trained professionals using a structured format. While interviews can be useful to help identify falsehoods on an applicant’s resume, they generally are very poor predictors of ethical behavior. Therefore, an employer should ensure that its interviewers are well trained, unbiased and focused on uncovering resume misrepresentations.
Drug testing is a very accurate method of discovering whether a job applicant recently used illegal drugs. As a result, drug testing is a somewhat useful means of predicting some forms of employee counter-productivity. This form of screening should lead to lower levels of absenteeism, tardiness and healthcare costs, while increasing workplace productivity and safety. Drug testing can also be a reasonable line of defense in negligent hiring suits.
On the downside, drug testing is relatively expensive and needs to comply with various state statutes. While courts have pretty much allowed drug testing regardless of the position a job applicant is seeking, it is commonly viewed as invasive and has caused extensive litigation. Additionally, research recently released by Quest Diagnostics, the nation’s leading provider of employment drug testing, reported that only 3.8 percent of drug tests for job applicants are positive. Ostensibly this rather low hit rate stems from the fact that many savvy job applicants simply abstain from the use of illegal drugs for a few days before they must submit a urine sample for testing.
Written integrity testing
Written integrity tests have been used by employers for over 40 years. These tests have been developed to predict whether an applicant will take part in various forms of workplace counter-productivity (e.g., absenteeism, illegal drug use, theft, not working during working hours). Research in the area of personnel psychology has consistently shown that these tests are extremely effective in predicting workplace counter-productivity. A quote from an extensive review of the research on written integrity tests states:
“Results indicate that integrity test validities are substantial for predicting job performance and counterproductive behaviors on the job, such as theft, disciplinary problems, drug use and absenteeism.”
In addition to the strong validity evidence discussed above, integrity tests have been shown not to exhibit disparate impact. These tests have been administered to millions of job applicants over the last forty years and have not been a lightning rod for litigation (only about 35 challenges). Moreover, in the case of every challenge, the EEOC or the relevant state human rights agency has found in favor of the employer. Also from a legal perspective, integrity tests can be a useful form of defense against negligent hiring suits.
Finally, written integrity tests are relatively inexpensive compared to all of the hiring procedures discussed here. They can be easily and quickly administered either online or via a toll free number. As a result, high-risk applicants can be screened out before time and money are wasted on interviews, credit checks, criminal background checks, references and drug testing.
Employers who are interested in using a written integrity test need to be sure to select a scientifically supported assessment. This stems from the fact that not all test publishers offer appropriately researched assessments. Employers should look for a publisher with appropriate professionals (e.g., industrial psychologists, employment attorneys, measurement specialists) on staff, as well as documentation of the test’s validity. An employer should also look for a publisher who is a member of the Association of Test Publishers.
Combat the problem before it’s too late
In summary, without an effective hiring process, a carwash’s bottom line and its exposure to legal liabilities can be jeopardized by various forms of workplace counter-productivity. Employers can effectively combat these problems in the employment process through the use of various screening tools.
Certainly an employer’s goals and jobs will determine their choice of tools used in their hiring process. However, given the effectiveness and low cost of written integrity tests, prudent carwash operators should strongly consider their implementation.
David W. Arnold is General Counsel for Wonderlic, Inc., where he is involved with legal issues concerning privacy, negligent hiring, employment testing and equal employment matters. He also serves as General Counsel for the Association of Test Publishers. Dr. Arnold holds a J.D. from Loyola University Law School and a Ph.D. in industrial psychology from the University of Nebraska.