Which screening method is most commonly used to help firms avoid negligent hiring lawsuits?

A reference check is a key part of a comprehensive background check and can provide additional insights into a candidate’s job qualifications. This article explains how a reference check works, the pros and cons of conducting a reference check, and how to design an effective reference check process, whether you handle it internally or use a third-party service.

Every hiring manager and HR professional wants to match the right person with the right job. But aside from interviews, how do you ensure you’re making the most informed decision?

One way of making a good hire is to do a reference check, which is a key part of a comprehensive background check and can help firm up a hiring decision. Performing a reference check lets you gain additional insights into a candidate’s job qualifications and helps you assess all of the candidates in line for a position. 

While you may already know the value of conducting reference checks, you might be reassessing your reference check process or wondering whether you should rely on a third party to take on this task. 

The information in this article can help you carry out an effective reference check process. Here are some of the questions we’ll answer:

What is a reference check?

What are the drawbacks and benefits of conducting a reference check?

Should you handle reference checks internally or use a third party?

What are some tips for performing a reference check?

What Is A Reference Check?

A reference check involves reaching out to an applicant’s former employers, managers, coworkers and teachers to learn more about the candidate’s performance in their previous roles, as well as their knowledge, skills, abilities, and character.

A reference check helps you make a more informed decision about whether to hire a candidate, and can also help you eliminate unqualified candidates. A 2019 survey by Robert Half found that 34% of senior managers had decided not to hire a job candidate based on a reference check.

Senior managers also cited these as the most important pieces of information they seek from reference checks:

A reference check may also reveal a lie on a resume. In a 2020 survey by ResumeLab, 36% of Americans confessed they had lied on their resume. For instance, they may have stretched the truth about their job experience or previous job duties.

How Does A Reference Check Differ From Employment Verification?

Employment verification confirms whether an applicant worked for an employer listed on their resume and verifies the applicant’s job titles and dates of employment. A reference check aims to address a broader range of issues, such as:

• How did the applicant’s employment end? For instance, did they quit or were they fired?
• Would you rehire the applicant if you had the chance?
• Does the candidate possess the job skills required for this position?

What Are The Drawbacks & Benefits Of Conducting A Reference Check? 

Now that we’ve clarified the difference between employment verification and a reference check, you might be wondering what the pros and cons of a reference check are.

Cons

Let’s start with a couple of the drawbacks:

• It’s hard to learn about true performance. Applicants usually don’t list people who will give them a bad reference. Therefore, you might not come across any red flags about their performance. That’s especially true if that reference didn’t work directly with the applicant. Of course, references may lie on behalf of an applicant or innocently supply misleading information.
• You may not get a reference from a current employer. Most applicants don’t want to tip off anyone in their current workplace that they’re looking elsewhere. As such, you may not get an accurate read on how they’re handling their current position and responsibilities.

Pros

Now, let’s move on to the benefits of reference checks. Among them are:

• Catching discrepancies in qualifications. If applicants have padded, overstated or lied about their qualifications, reference checks might help you discover this.
• Get a clearer picture of the applicant. A reference check can fill you in on an applicant’s intangibles, such as demeanor and work ethic, as well as any potential weaknesses they may need to work on. The Society for Human Resources Management (SHRM) says a reference check helps distinguish between “a true high flier” and an imposter.
• Performing due diligence. Conducting a reasonable inquiry into the employee’s background could help you defeat a negligent hiring lawsuit.  

Handling Reference Checks Internally vs. Using A Third Party

Regardless of the pros and cons, you should be aware of concerns about handling reference checks on your own. These include:

• Legal concerns. Employers need to be consistent in how they conduct reference checks as part of their employment screening process. Otherwise, they open themselves up to discrimination lawsuits.
• Time obligations. Conducting reference checks can eat up a lot of time, from contacting references and scheduling calls to making calls and taking notes during the interview. One call itself could easily take 30 minutes to an hour. If you’re contacting three references and each call takes 30 minutes, you’re spending 90 minutes on the phone per hire.
• Bias. Handling reference checks internally may introduce less objectivity into the assessment of job candidates. That’s because a hiring manager or HR professional may have become attached to one candidate over another, leading to the potential for subjective decision-making.

Hiring a third party that specializes in professional reference checks could help an employer avoid these concerns.

6 Tips For Performing An Employment Reference Check

A reference check is a key part of the employment screening process. Here are six tips for performing an employment reference check.

1. Take the Process Seriously

A casual approach to a reference check could stick you with a new hire who winds up not being the best fit for the job. Here are a few reasons why you should take a purposeful approach to reference checks:

• Despite the drawbacks, reference checks can be informative and could be what makes one candidate stand out as a clear must-hire.
• You’re asking references to take time out of their day to help you make a decision about a candidate. Therefore, it’s wise to treat references with respect.
• A properly-conducted reference check can be an important defense against a negligent hiring claim. If someone is injured as a result of your employee’s actions, the injured party may claim that you knew or should have known that the employee was unfit for the job and that the decision to hire that employee created an unreasonable risk of harm. If you can show that you conducted a reasonable inquiry into the employee’s background, which may include a reference check, this could help you defeat a negligent hiring lawsuit.  

2. Get Feedback From Others Involved in the Interview Process

Gathering feedback from colleagues involved in the interview process can help you gain more information during reference checks. Here are some questions you can pose to other participants in your hiring process to aid this effort:

• Do you have any concerns about the candidate that you want more information about?
• Are there any follow-up questions you didn’t get a chance to ask?
• What are the most important factors to you in deciding whether to hire this candidate?

3. Provide Basics About the Job

When you share details about the job you’re trying to fill, a reference has a better idea of what to mention during a reference check. Ultimately, this helps you figure out whether the candidate’s background and skills meet your needs. Here are few things to discuss with a reference:

• What the role involves. You might tell the reference that the job requires attention to detail or lots of multitasking or strong management skills. The reference’s responses can help you zero in on whether the applicant will perform well in this position.
• How the applicant handles different situations. Have the reference describe how the applicant dealt with scenarios that would be similar to duties in the new position.
• What the applicant’s strengths and weaknesses are. Learning this information can give you a better notion of whether this candidate is the correct person to hire for the job.

4. Ask the Right Questions

Asking the right questions when you’re speaking with a reference can help pin down whether you should hire a candidate and can shield you from legal problems. Follow these steps to help ensure your questions are on the right track:

• Ask open-ended questions. Specific open-ended questions give the reference an opportunity to provide examples of a candidate’s performance. For instance, you might ask, “Heather told me she worked on a project that helped your company streamline the purchasing process. What was her role in this?”
• Inquire about more than technical skills. Learning about a candidate’s soft skills, such as how they communicate with colleagues, can help determine whether they’re a good fit for the role.
• Pose legally defensible questions. Make sure you’re up to date on which questions are appropriate and which questions are off-limits. Above all else, be sure to stick to questions that are job-related. It’s worth noting that during the federal government’s 2019 fiscal year, the US Equal Employment Opportunity Commission recovered more than $486 million for victims of workplace discrimination, including job applicants.

5. Organize Information

For people in your organization to properly weigh a hiring decision, the information you collect during reference checks must be organized and shared. Why? Compiling the findings of reference checks in an orderly manner makes it easier for everybody involved in the hiring process to access the information and compare job candidates.

To assist your colleagues, you might consider coming up with a bulleted list of key findings from a reference check and placing it in buckets like “technical skills,” “soft skills, and “strengths and weaknesses”. Organizing all of this information is important, however, it can consume a fair amount of time.

Be sure to carefully document every reference check. This information could come in handy if someone files a complaint about the hiring process or hiring decision.

6. Consider Getting Help from Experts

Reference checks represent a key piece of the hiring puzzle. But the reference check process can be puzzling and time-consuming. A DIY approach can lead to inconsistency in asking questions during reference checks and lack of knowledge about which questions are OK to ask, and which are out of bounds. 

Therefore, you may want to consider enlisting help from a third-party team of experts to handle the employment reference check process for you.

Reference Checks: The Next Step

So, now you know how beneficial reference checks are and what they look like. But you also know how time-consuming they can be. A critical consideration is whether you should tackle all of this internally or hand it over to an experienced third party. Entrusting your reference checks to a third-party provider like GoodHire saves time, streamlines recordkeeping and ensures consistency, all of which help you hire faster and more efficiently. 

Disclaimer

The resources provided here are for educational purposes only and do not constitute legal advice. We advise you to consult your own counsel if you have legal questions related to your specific practices and compliance with applicable laws.

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