Editor’s Note: William Joseph Austin, Jr. is a member of the Labor and Employment Practice Group at Ward and Smith, P.A.
Background
We might call it a Scud theory of recovery. Like the notoriously inaccurate Soviet missile, negligent hiring is a hit, but mostly a miss, claim for relief that has evolved in the domain of employment law.
An employer assuredly has a legally recognized duty to others to select competent employees. This principle is an integral part of the law of negligent hiring, but when and where it attaches can be enigmatic.
In North Carolina, the employer’s duty extends to the protection of “any member of the general public who comes into contact with the employment situation.” It covers third parties (customers, members of the general public, etc.) where:
● The employee and the prospective plaintiff are in places where each has a right to be when the wrongful act occurs;
● The plaintiff meets the employee as a direct result of the employment; and,
● The employer is to receive some benefit from the meeting of the employee and the plaintiff.
If the duty is established, then the elements of a claim for negligent hiring come into play. The elements are:
● A specific tortious act by the employee;
● The employee’s incompetence or unfitness;
● The employer’s actual or constructive notice of the employee’s incompetence or unfitness; and,
● Injury resulting from the employee’s incompetence or unfitness.
Real World Examples
The North Carolina Court of Appeals’ opinion in the case of Little v. Omega Meats I, Inc., illustrates the hit-or-miss nature of this kind of claim. A salesman for Omega Meats named Smith broke into the plaintiffs’ home and assaulted them. Omega Meats had supplied Smith with a company truck and specifically commissioned him to sell its products door-to-door. In the course of a work day, Smith broke into the plaintiffs’ home with intent to do them harm, not to sell them any Omega Meats.
Smith had a record of convictions for drug offenses and assault. During an earlier stint with Omega Meats, he was convicted of robbery and kidnapping. After serving a prison sentence, he was rehired by Omega Meats and, back on the street again, assaulted the plaintiffs.
The North Carolina Court of Appeals held that the employer did not have a duty to the plaintiffs on these facts.
On the other hand, an unusual, yet palpable, hit for the plaintiffs came in the case of White v. Consolidated Planning, Inc. In White, the North Carolina Court of Appeals overturned dismissal of a negligent hiring claim made by customers of a financial planning firm. The plaintiffs’ financial advisor, Consolidated Planning’s employee, misappropriated the plaintiffs’ money. In an interesting twist, the dishonest advisor was the plaintiffs’ own son. Nevertheless, the Court of Appeals held that the plaintiffs had adequately alleged that Consolidated Planning would have discovered the employee’s unfitness had it conducted a reasonable investigation prior to hiring him. The employee was allegedly terminated by his previous employer for engaging in similar illegal activity. An investigation by Consolidated Planning supposedly would have revealed the improprieties.
Another miss for plaintiffs is found in the North Carolina Supreme Court case of Medlin v. Bass. The wrongdoing was sexual assault of a student by a school principal named Bass. At his previous school, Bass had also been accused of sexually assaulting a student, a complaint that was never resolved one way or the other. Bass then obtained employment in the defendant school system where the assault took place. A representative of the new employer did speak with a school supervisor, principal, and superintendent of the school system where the earlier assault was alleged to have occurred. None of these individuals divulged the allegations to the new employer, even though a question was raised about Bass’s “sexual proclivities.”
The North Carolina Supreme Court upheld summary judgment for the employer: “The foregoing forecast [by the plaintiff of what it can prove] is devoid of evidence that [the school system employer]…knew or reasonably could have known of defendant Bass’ alleged pedophilic tendencies prior to the incident that is the subject of this lawsuit.” The employer at least went to the right people, albeit with questionable efficacy.
In the 1993 case of Stanley v. Brooks, another miss for a plaintiff, the North Carolina Court of Appeals added another wrinkle. A customer sued a car dealership for a salesman’s alleged sexual assault during a test drive. Three years earlier, the salesman, Brooks, had been charged with first degree sexual offense and first degree burglary, but pleaded guilty to lesser charges. However, the car dealership did not do a criminal record check on Brooks.
The Court of Appeals’ opinion makes reference to “a presumption…that an employer has used due care in hiring his employees.” The burden is on the plaintiff to show that the employer had knowledge of the employee’s incompetence.
The Court then said there was no evidence that the employer had actual knowledge of Brooks’ criminal past. “The record is devoid of any suggestion that defendant had any constructive knowledge of Brooks’ past, or that defendant did not exercise due care in hiring Brooks.” The only information the dealership supposedly possessed was that Brooks was an excellent car salesman. According to the Court, the employer did not have a duty to conduct a criminal record check.
Stanley was a 1993 pre-Internet case. Does the ability of a 21st Century employer to obtain a criminal history report by hitting a few keystrokes and giving a credit card number change the calculus? The 2013 case of Nowlin v. Moravian Church in America fails to shed additional light. In Nowlin, the North Carolina Court of Appeals affirmed summary judgment against the plaintiffs who advanced several theories of recovery including negligent hiring of a camp counselor. The plaintiffs alleged that the counselor sexually assaulted a 16-year-old camper who attended the defendants’ summer camp. According to the Court of Appeals, the “undisputed evidence” demonstrated as a matter of law that the defendants acted reasonably in hiring the counselor. That evidence included the counselor’s “personal disclosure indicating that he had not had any criminal conviction,” and he was not listed on the National Sex Offender Registry.
He also provided “a favorable recommendation in a telephone interview with a trusted reference” and had a “very positive” record of employment with the defendant’s camp from the previous summer. The result is hard to argue with on those facts, but the opinion offers no prescription for what information prospective employers should systematically seek.
In light of these cases, it appears that a prospective employer in North Carolina is entitled to a presumption that it has used due care when it hires a new employee and generally does not have the duty to conduct a criminal record check, but does have a duty to at least inquire of the immediate past employer. Yet the creation of a foolproof checklist is unascertainable and, with the increasing ease and economy of getting an online criminal record check, continued reliance on the 21-year-old Stanley case would seem suspect.
Due to multiple factors, such as the hit or miss aspects of doing it yourself as well as the increasing mobility and anonymity of the workforce, employers increasingly employ independent agencies known as Consumer Reporting Agencies to perform background checks. If a report on an applicant is obtained from a Consumer Reporting Agency, then the process and product are regulated by the federal Fair Credit Reporting Act.
“Ban the Box” or “Fair Chance” Laws
Obtaining a criminal history will be further complicated in state and local jurisdictions that have enacted so called “ban the box” or “fair chance” hiring regulations. There, inquiries about the individual’s conviction history must be delayed until later in the hiring process – for example, after the first interview (New Jersey, effective March 1, 2015) or after extending a conditional offer of employment (Hawaii). In North Carolina, although there is no statewide “ban the box” law, several city and county ordinances have been enacted that regulate criminal record checks in public employment (Carrboro, Charlotte, Cumberland County, Durham, Durham County, and Spring Lake).
Conclusion
With all of this said, if a prospective employer wants to conduct background checks in house, our recommendations are as follows:
• Obtain employment history and references from the applicant, make inquiries to the past employers and references, but only ask for information related to job performance;
• Subject to state and local “ban the box” or “fair chance” hiring regulations, ask the applicant for a criminal history, limited to convictions only;
• Use 21st Century resources including obtaining an independent online criminal history;
• If the process turns up contradictions or information that might disqualify the applicant, bring it to the applicant’s attention and ask for any mitigating information; and,
• Make a final decision based on an individualized assessment of the applicant’s fitness for the position being offered.
© 2014, Ward and Smith, P.A.
Ward and Smith, P.A. provides a multi specialty approach to the representation of technology companies and their officers, directors, employees, and investors. William Joseph Austin, Jr. practices in the Labor and Employment Practice Group where he concentrates his practice in labor and employment law, workers’ compensation, and employee benefits. Comments or questions may be sent to wja@wardandsmith.com
This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.
