The Risks of Skipping an Employee Background Check

Negligent hiring is a legal theory that holds employers liable for harm caused by an employee when the employer knew — or should have known — that the employee posed a risk. If a background check would have revealed a relevant history and you failed to conduct one, you may be held liable for the resulting harm.

Courts have found employers liable for negligent hiring in cases involving workplace violence, theft, fraud, and harm to customers or third parties. Jury awards in negligent hiring cases can be substantial — often in the hundreds of thousands or millions of dollars.

The standard is not perfection. Courts ask whether a reasonable employer in your position would have conducted a background check. For most positions, the answer is yes.

An employee with a history of workplace violence, harassment, or theft poses a direct risk to your other employees, your customers, and your business. A background check is one of the most effective tools for identifying these risks before they materialize.

Beyond physical safety, a bad hire can damage workplace culture. An employee who misrepresented their qualifications, has a history of dishonesty, or creates conflict with coworkers can undermine team morale and productivity in ways that are difficult to quantify but very real.

Studies consistently find that a significant percentage of job applicants misrepresent their qualifications on their resumes. Common forms of resume fraud include inflated job titles, fabricated degrees, false employment dates (to hide gaps or a termination), and invented certifications.

Employment and education verification — components of a comprehensive background check — catch these misrepresentations before you make a hiring decision. Discovering that a new hire lied on their resume after they have started is a much more difficult and expensive problem to solve.

Some industries face heightened risks from unscreened employees. Healthcare employers who fail to screen for excluded providers can face Medicare and Medicaid exclusion penalties. Financial services firms that hire employees with a history of financial crimes face regulatory scrutiny. Employers who work with children, the elderly, or other vulnerable populations have a heightened duty of care.

In many regulated industries, background screening is not just a best practice — it is a legal requirement. Failure to comply can result in loss of licensure, regulatory fines, and civil liability.

The direct cost of a bad hire — recruiting, onboarding, training, and severance — is typically estimated at 30% to 50% of the employee's annual salary. For a $60,000 position, that is $18,000 to $30,000.

But the indirect costs are often larger: lost productivity during the vacancy and transition, damage to client relationships, harm to team morale, and potential legal liability. When you add it all up, the cost of a thorough background check — typically $30 to $100 per candidate — is a very small investment relative to the risk it mitigates.

The question is not whether you can afford to screen your candidates. It is whether you can afford not to.