There was a time when reference checks were considered a valuable tool in evaluating a potential new hire. But a vast matrix of laws has been constructed around the practice, and now many accomplish little more than verifying if and when a candidate was previously employed.
In the past, a hiring manager could place a few calls, ask a few straightforward questions and get straightforward responses. A reference check might elicit information from former co-workers and supervisors about the candidate’s work ethic, ability to function under stress, day-to-day performance, or how effectively he or she worked in a team environment.
Those conversations could help the hiring manager assess how the candidate might perform in the future, contributing to a more informed judgment about whether to offer employment.
But the informal nature of reference checks, often based on subjective opinions, became the root of the problem. All organizations hire staff, but how they go about it varies from employer to employer.
Recruitment processes such as resume reviews, candidate interviews and reference checks have traditionally not been conducted by structured guidelines.
They are typically posed by different individuals, who are often not formally trained on how to ask questions. This lack of formality opened the door to problematic responses, both positive and negative.
To Ask or Not to Ask
There are numerous state and federal regulations that potentially impact the use of reference checks. These regulations do not mandate what can and cannot be asked, but they offer loose guidelines based on intent.
The rationale behind the laws is to protect the individual from invasions of privacy, defamation of character and discrimination. Protracted periods of unemployment also tend to make the legal route more attractive.
The majority of states have adopted reference check immunity laws. These protect an employer from litigation based on allegations by another employer that they let a bad apple slip through their employment screens because of negligence.
They give employers the ability to extend the professional courtesy of a reference check. They also can lower the probability of honesty, assuming whatever information is provided is truthful, whether positive or negative.
Even with these protections in place, employers are still open to potential lawsuits from individuals.
This has pushed many employers to restrict their participation in reference checks to just the facts, such as verification of name, job title and dates of employment. But even this minimalist approach can backfire.
The reference check immunity laws offer protection against “negligent referral,” providing only positive information about a former employee’s job performance and ignoring what could potentially be harmful to another employer, its workforce or those it serves, such as neglecting to admit knowledge about drug abuse by a doctor.
Organizations cannot be held liable for sharing factual information, no matter how damaging it may be. For instance, let’s say an employee terminated for manipulating payroll records to reduce his personal tax liabilities got a negative reference that sabotaged his chances with a new employer.
If the employee subsequently sued his former employer for interfering with his search for work, the court likely would find no negligence present; the former employer is not liable for telling the truth.
While all of this makes employers leery of saying something that can get them into trouble, the perception of risk, in this case, may be worse than the reality. The majority of reference checks go unchallenged in the courts.
From Better Hiring to Avoiding the Worst Case
Despite their questionable value, a SHRM poll on reference checks found three-quarters of organizations continue to use them. The reasons for doing so have shifted a bit, however.
Reference checks provide a means to get a sense of a candidate’s character, but according to the survey the most cited reason for conducting them is not to ensure great hires and a more productive workplace but to reduce liability for bad hires.
The prospect of sitting at the defendant’s table in a civil lawsuit relating to a reference check that went wrong is daunting. But it is often the high cost of bad hires that stress talent managers’ waking hours.
To promote best practices in reference checking, talent managers should garner as much intelligence as possible on potential hires. Professional courtesy dictates the same when receiving calls for a reference check on a former employee.
To protect the organization against the potential for missteps, establish clear guidelines for handling the requests. It might be advantageous to explore using a third party to automate the process.
Some vendors will handle reference checks through an online survey tool that garners input from multiple references without attributing individual responses and aggregates multiple references into a composite picture.
Pursue Better Pre-Hire Screening
While it is important to conduct thorough pre-employment checks, there are a number of valuable ways to do it beyond traditional reference checks, such as credit checks, criminal background checks, employment verification and educational verification. There is also social media to explore.
A good deal of pre-employment vetting takes a backward look at past behavior and performance. A look into the future may be more important. Behavioral assessment can help to predict future performance and offer a validated and objective means to evaluate candidates.
No matter which tools are used, the ideal strategy is to be consistent about hiring practices, put as much automation in place as possible to eliminate subjectivity and lower risk, and establish a way to infuse hiring decisions with the best information available.
Jay Floersch is an RPO solutions architect for consultancy Aon Hewitt. He can be reached at firstname.lastname@example.org.