Wednesday, 24 January 2018

Background Checks on Employees

Authors: Donovan Cheah (Partner) and Adryenne Lim (Legal Executive) (Donovan & Ho)

Tales of errant employees are not unheard of. We are dealing with people after all; it is a fact of life to be faced with a diversity of characters and personalities, both good and bad. In ordinary interactions, individuals can just walk away and avoid dealing with difficult personalities. However, the remedy of “walking away” has no application in the employment arena: employment relationships are bound by contract, and in order to terminate the relationship, the burden is on the employer to justify that it is for just and reasonable cause, which, if challenged by the employee, may involve claims of unfair dismissal which are often costly to defend.

Thus, before an employee is hired, employers should undertake appropriate vetting procedures to ensure that the employee is both suitable for the job and do not have personality issues which may bring future complications to the employer, such as the following:

 
•  The employee may cause the work environment to be unpleasant that the overall morale of other employees are affected
          •  The employee may cause disruptions to the company’s business (e.g. due to high absenteeism, lack of suitable skills for the job)
          •  In the event that it becomes necessary to terminate the employee, the employee must bear the risk of having to defend against claims of unfair dismissal.
While there is no fool proof way to assess a potential employee’s suitability, undertaking proper vetting procedure may nonetheless help, albeit to a certain extent. The vetting exercise should include taking steps to verify that the information given by the employee is true and accurate, and should be undertaken before and not after the employee is hired. This advice may sound obvious to many, but there are cases where the employer had overlooked or did not consider it necessary and was subsequently forced to deal with the consequences.

The case in Khoo Kim Loang and Shock Media Studio Sdn Bhd (Award No: 51 of 2018) is illustrative of this point. In this case, the company decided to conduct investigation into the employee’s background after the employee started exhibiting signs of trouble such as poor attitude. The result of the investigation showed that the employee had lied in his resume by saying that he had worked for companies which were later found to have never existed, and the employee was terminated as a result.

What followed after the revelation about the employee’s lies and his subsequent termination should be taken as a tale of caution for employers. Notwithstanding the employee’s conduct in faking his resume, the company was forced to defend against the claim of unfair dismissal.

The Company eventually agreed to settle this case knowing full well that fraud was committed because most of the witnesses had already left the Company and the other representatives of the Company were too busy to attend to the trial.  Despite the settlement, the Court perused the documents and pleadings filed and formed a view that there was sufficient evidence to prove that the employee had lied in his resume which justified the termination.

Another interesting and troubling fact about the case is that it was also later found that the employee had been involved in a string of other industrial court cases whereby a fair number of other companies had agreed to settle the case (without admission to liability). The Court listed a total of fourteen unfair dismissal claims filed by the Claimant against his former employees. It may be inferred (though there may be other plausible explanations), that just like the company of this case, the other companies may have settled for other reason not relating to the merits of the employee’s claim.

In normal situations, an amicable settlement of unfair dismissal claims will usually result in a simple award from the Court confirming the settlement and the withdrawal of the employee’s claim. In this particular case, notwithstanding the settlement, the Industrial Court proceeded to consider the merits of the employee’s claim anyways and publish its findings. The Industrial Court took this unusual step due to the seriousness of the allegations against the employee:

“It will do well for employers to carry out more thorough vetting of CVs submitted by prospective employees to save themselves time and money unnecessarily spent on litigation such as in this case. The Court is of the view that based on the research of leading companies that clearly shows that CV fraud is on the rise, it is time for employers to check the CVs of prospective employees more thoroughly before making any job offers. And the Court is writing this Award in the hope that it will raise awareness amongst employers as the Court had a similar case in 2016…”

Key Take-Aways:

Employers should carry out proper vetting exercise before making any hiring decisions (with regard to the employee’s right to privacy according to international law standards). Information on unfair dismissal cases are publicly available on the Industrial Court website, and employees can incorporate this into their reference checks. This is important to reduce the chances of hiring problematic employees and being engaged in unwanted litigation should the relationship go sour.

An amicable settlement between parties may not necessarily shield the facts of the claim from being considered by the Industrial Court. As a court of “equity and good conscience”, the Industrial Court may nevertheless still go beyond the settlement of the parties and publish its findings on the conduct of the parties if the allegations are serious enough or are of public interest.

This case further demonstrates the need for reform of the unfair dismissal landscape. Companies and employers may often be put to unjustified costs and expenses in defending  frivolous unfair dismissal claims. An employee who knowingly files a frivolous unfair dismissal claim often suffers little consequence except perhaps an unfavourable award from the Industrial Court.




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