More law firms are now performing pre-employment background investigations, following the national trend that began approximately 20 years ago. These investigations include reports for new associates, administrative staff , partners and even independent contractors. A national study conducted on behalf of CareerBuilder revealed that 72 percent of U.S. employers perform a background investigation on all new hires.
Many firm leaders believe that they are immune from dishonest employees and forego performing background investigations. Consider the following:
- A secretary for an Atlanta firm used her position to carry out an embezzlement scheme spanning well over a decade, netting over $800,000.
- In Virginia, a former bookkeeper forged law firm checks totaling more than $500,000 to fund investment accounts, purchase a BMW, and pay her mortgage.
- In Georgia, an associate lawyer at a national firm stole more than $500,000 by performing investigative services for clients and then submitting false invoices under the name of an investigator who worked at the firm but did not work on the billed matters.
- In Pennsylvania, a paralegal handling estate matters forged the signature of the executors to steal more than $100,000. She had stolen the money to pay restitution to her former employer, another firm from which she had stolen $285,000.
As the above examples illustrate, theft and fraud can be committed by anyone in a firm, regardless of stature or title. In fact, it is usually the long-term, trusted employee who is in the best position to execute a fraud.
In a recent white paper entitled, “Professional Liability Risk Control,” CNA Insurance stated: Law firms that do not perform complete background checks on job candidates run the risk of employing someone with a history of job changes, relocations, civil litigation or criminal prosecution that could be warning signs of past embezzlements or frauds. Employment history, application information and references should always be verified. Past employers can be a fruitful source of information about a candidate’s prior misdeeds. Law firms that fail to follow these basic hiring protocols may also be liable for any harm that its employee later causes to third parties.
Once a firm decides to begin a screening program, the next step is to select an appropriate vendor for the risk involved. My firm began performing background investigations in 1968 for law firms, with a focus on accuracy and in-depth reporting. Professional service firms are unique in that their employees have access to highly sensitive client information such as trade secrets, financial data and personally identifiable information. They may also have access to significant client funds and assets. The depth and scope of the background investigation should be directly proportional to the risk created by placing a dishonest employee in the position under consideration.
As background investigations became more common, new providers began selling cheap and quick background checks. The primary drivers for this commoditized approach has been speed and low cost with little quality control. While this has garnered some benefits for employers in terms of initial savings and quicker processing time, it has led to an increase in regulatory enforcement actions and class action lawsuits as a result of errors in background reports. Disgruntled candidates in the legal industry who have been spurned as a result of an inaccurate background check tend to be angry and oft en have ready access to legal resources.
“Accuracy is critically important not only to the consumer, whom the laws and regulations are designed and created to protect, but also to the employer who relies on the information in the background check to make an informed placement decision,” said Melissa Sorenson, executive director of the National Association for Professional Background Screeners.
Indeed, we expect that class action lawsuits alleging noncompliance with the Fair Credit Reporting Act will continue to increase in 2017. “The Fair Credit Reporting Act has been a hotbed for litigation for a couple of years and does not show signs of slowing down in the near future,” Sorenson said. Recent lawsuits filed against employers for alleged violations under the FCRA have proven to be costly given the statute’s lack of a cap on awards, the availability of punitive damages and attorney fee provisions.
Additionally, cheap background checks miss critical information. We regularly see candidates applying to our client firms who have items in their past that make them absolutely unsuitable to work at a law firm. Either the current employer is not performing background investigations or they are using one of the cheap providers.
A reputable firm with experience serving law firms can help establish a legally compliant program based upon their experience with other clients and industry best practices. You want to ensure you are receiving the right information to make informed hiring decisions for the protection of your firm, its people and clients. Kevin P. Prendergast