200,000 Reasons an Employer Should Not ‘Wimp Out” During the Background Checking Process

Welsh Mfg. vs Pinkertons was a negligent hiring case which should demonstrate to employers that just running a bare bones background check may not be enough to protect the employer from a negligent hiring verdict. Here is the case:

Throughout Rhode Island and parts of Massachusetts, Pinkerton’s, Inc. was a well-known professional name in business security services, providing security guards to several major clients. Welsh Manufacturing, a regional factory that produced gold sunglass frames for the federal government, enjoyed a generally positive, three-decade relationship with Pinkerton’s.  Welsh’s facilities spanned two buildings in which was stored a large reserve of gold for production. Under the security arrangement between Welsh and Pinkerton’s, Pinkerton deemed that one unarmed security guard would be sufficient for coverage of the Welsh premises, and guards were assigned on a rotating basis to a 24-hour daily schedule.

The night shift began at midnight, with the assigned guard ordered to verify security on every floor and note where he had checked. In this case, one of the guards was Donald Lawson and Pinkertons did what too many employers do, they took a short cut in their background checking which had disastrous results.

Pinkerton’s preselection process in hiring Lawson was as follows: Lawson filled out a general application form calling for among other things the names of his previous employers and three people who had known him for 5 years. Pinkerton’s did not contact the three character references but chose to forward reference forms to Lawson’s high school principal and to the Rhode Island hospital where Lawson had worked as an emergency room technician for about one month. The reference forms consisted of one question that asked whether the person queried could recommend the applicant without reservation and a request for any adverse comments on Lawson’s character. Neither respondent commented on his character. Pinkerton also ran a Criminal background check only in the state of Rhode Island.

Despite the security presence, three thefts of gold were reported over a month and a half period , resulting in a total loss to Welsh of over $200,000. The thefts were all carried out at night by the same suspect. During the first two thefts, the same security guard, Donald Lawson, was on duty and reportedly allowed the perpetrators to enter the building. At the time of the two incidents, Lawson, then 21 and a member of the US Navy, had been working for Pinkerton’s for less than six months. It was later discovered that Lawson had conspired with his criminally inclined neighbor, Anthony Fiore, to secure employment at Pinkerton’s for the sole purpose of arranging multiple robberies. In exchange, Lawson would take a share of what Fiore was able to steal. For the third theft, Lawson was no longer employed by Pinkerton’s, but had provided Fiore with detailed instructions on how to break into the facility and successfully handcuff the on-duty guard at gunpoint, before emptying Welsh’s entire cache of gold.

. Welsh sued Pinkerton’s for negligent hiring relating to the three thefts. In the lawsuit, Welsh asserted that Pinkerton’s failed to adequately screen its employees, and further claimed that Pinkerton’s choice of security guard was so misguided that their negligence was a proximate cause of its loss of over $200,000 in gold.

The Superior Court in Rhode Island ultimately ruled in favor of Welsh presenting them with a $200,000 verdict, with an appeal by Pinkerton being denied. The court found that Pinkerton’s cursory investigation prior to Lawson’s employment provided it with little intelligence on him and certainly not enough to hire Lawson for a sensitive assignment such as guarding Gold. In its decision, the Court argued that precedent dictated the direct responsibility of an employer for the actions of employees deemed unfit for a position. An earlier case was cited involving a tenant who successfully sued her apartment complex owner for negligence after being sexually assaulted by the on-duty manager. The manager had been hired despite providing references lacking sufficient contact information. It was later discovered that he had a criminal background and the two references were closely related to him. All of this, the Court determined, could have been discovered via a comprehensive background check.

Another cited case involved an apartment complex security guard who stole a blank check from a tenant’s home and wrote it to himself, forging the account holder’s signature. The bank, failing to verify the signature, cleared the funds for payment. The bank then sued the security guard and his employer, claiming hiring negligence. Although the employer noted that it had given the guard a skill test, that he had a security guard permit from the local police, that they had contacted his prior employers, and that he had passed a course in criminology, the court still maintained that insufficient due diligence was done. It argued that the permit from the local police only required a felony check, which would not alone prove that the guard had no propensity for theft and general misconduct. Another Court decision in New Jersey also used in the Welsh v. Pinkerton decision asserted that any employer hiring those who may deal with the public can be held liable for the actions of their employees if reasonable care, such as background checks, was not taken when making a hiring decision. This can stand even if the actions of the employee were not directly within the scope of their job responsibility.

In the Welsh v. Pinkerton’s decision, the Superior Court defined the degree of employer liability on the basis of duty between an employer and those to whom the employer has responsibilities, such as end users and customers. An employer whose employees have direct interactions with customers and can put them in harm’s way, or adversely impact their business, can be directly liable for the employee’s actions. The Court argued that an employer must do its due diligence prior to hiring new employees, particularly when the employee will be in charge of safeguarding the safety and security of customers and end users. Just as the manager in the prior case had access to a universal key and thus to all of the apartments, and so an assurance about his record would have been crucial, so too did Pinkerton’s employee, Donald Lawson, have access to Welsh’s hundreds of thousands of dollars in gold assets. The Court utilized the long-established general tort principles of negligence when making its decision, which hold the employer responsible if they knew or should have known, via verification such as a background check, that a candidate for employment may pose a substantial risk to the public.

What is most critical to this case is the Superior Court holding that an employer can almost always maintain some liability for the negligent hiring of employees who come in direct contact with the public - the only varying factor being the degree of liability based upon the nature of the employee’s position. Because Welsh was known to hold a substantial amount of gold on premises, Pinkerton’s should have done a more detailed background check. While a criminal background check can often be or appear to be enough during a hiring decision, in Pinkerton’s case, the simple reference check and criminal background check that they conducted was insufficient, leading to enormous business losses, loss of reputation, and a severely negative impact on its three decades of business relationships.

Welsh v. Pinkerton, and similar cases, continue to prove the critical need for ample due diligence, including comprehensive background checks, on the part of every employer whose employees are in a position to bring harm to the business and to its customers and clients.

The takeaway for employers should be that they should not shortcut the background checking process and sometime just waving a limited criminal background check and some perfunctory comments from employers in front of a court may not be enough to protect them from legal liability.

Background Checks Express is your one stop source for Accurate, Affordable and Accessible Background Checking for employers and property managers. You can learn more at our website at www.bcxcorp.com. If you have any questions or would like to learn how to protect your company from Negligent Hiring litigation just email me at [email protected] or call us at 904 248 4694.