Hiring Your First Employee

Looking to bring your first employee on board? We'll help you understand the legal requirements of hiring staff so you don't hit any rough waters down the line.

For months, you've operated your new business as lean and mean as possible and continue to wear every hat yourself. Finally, you've hit a point--or your breaking point--where, in order to remain competitive and prosper, you'll need to welcome a helping hand aboard your tight ship.

But before bringing just anyone on board, you need to understand that extra manpower entails a whole new string of legal obligations, liabilities, expenses and, of course, paperwork. One estimate tallies the average cost of recruiting, hiring and training a new employee at close to $4,000.

Beyond the red tape, hiring mismatches can result in high turnover, absenteeism, higher healthcare costs, workplace violence and theft--substantial costs to an organization's bottom line and reputation.

To help you navigate the legal ramifications of the hiring process, we've laid out the steps and precautions you should follow to ensure you make informed decisions, while staying within legal and ethical boundaries.

1. Don't trust your instincts. Whether your new recruit will be filing reports or configuring computer networks, realize that criminal, under-qualified, and emotionally unstable minds hide in all uniforms and job titles. In reality, nearly 40 percent of all job applications and resumes include bogus or inflated facts. Plus, the number of negligent hiring lawsuits in this country is mounting--if your staff member's actions hurt someone, you can be held accountable and sued. And with terror acts, corporate scandals and identity theft on the rise, trusting your gut as a basis to hire is simply unsafe.

So just what do background checks check, and what kind of stuff is off limits? The search typically consists of confirmation of prior employment claims, determination of worker's compensation claims and criminal and incarceration records, drug tests, credit history and driving record. In some cases, an identity (Social Security) check is undertaken.

While much of this information is documented publicly, certain personal records, including education, military and medical, are confidential and necessitate an applicant's consent before digging them up. If you can, you should try to obtain original educational credentials. With advances in technology, a manufactured diploma or degree is as simple as typing in a few keystrokes.

When prying into an interviewee's possible criminal past, take note: While a criminal conviction can be reported indefinitely, arrest records, paid tax liens, accounts placed for collection, civil suits and judgments can't be included on an employment background check after seven years. In some states, more stringent reporting rules apply. In California, for example, bankruptcies are off limits after ten years.

If you plan to farm out a fact-finding hunt to a third-party, you're required by federal law to alert the person who's under investigation in writing. You must also notify the applicant if he or she is being denied a position due to disparaging information you've uncovered, and give him or her a chance to refute that information.

Be forewarned, however: The internet is loaded with scam artists and private companies that compile "virtual rap sheets." What such online brokers dish up isn't always accurate or current, and the low rates they advertise may be deceptive.

Each of the following firms is established in this arena and has been in existence for thirty years or more:

Understand that the more jurisdictions you want to search, the more you're likely to pay.

2. Test for illegal substances. With more than 250,000 drug- and alcohol-related deaths a year nationwide, our society's battle against substance abuse is far from over. Whether cocaine or sleeping pills are the drug of choice, addicts can be a terrible drain on an organization's productivity and balance sheet. Did you know that 65 percent of on-the-job accidents are related to substance abuse? And drug-abusing employees are six times more likely to file worker's compensation claims than other staff members.

To weed out such weak links from your work environment, pre-employment and random drug testing are an employer's best lines of defense. Some occupations actually mandate such checks, including industrial tractor and truck operators, material movers, child-care workers, teachers, private and corporate investigators, state and federal personnel and police officers.

Before instituting a drug exam of your own, bear in mind, on pre-employment interviews, it's illegal to inquire about a candidate's prescription medication use. However, if an applicant refuses a drug test, an employment offer can be denied or retracted.

3. Screen for unwanted behavior. Depending on the position you're trying to fill, there are supplementary screening options available. Psychological testing, handwriting analysis, skill and aptitude tests and even lie detector tests are additional assessment tools that business owners exercise today to help them select the best job candidates. Such profiling allows you to select people who have the skills and the temperament needed to succeed in your business. To avoid any legal problems, before administering such tests, be prepared to demonstrate job-relatedness, non-discrimination and statistical validity.

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