If you hire new employees in your business, you have good reason to cringe when you hear the words "due diligence" in reference to a new recruit. Employers are increasingly being put into a position where they can get sued by clients, job applicants, current employees, and former employees for failing to perform adequate background checks before they hire someone new. If you're an employer, this is what you should know about how to perform a background check and avoid being sued.

You have to make sure that they are complete.

You don't want to hire someone who could potentially put your clients or other employees at risk of either physical or financial harm. For example, you don't want to hire someone with a history of credit card theft to work in your bank where he or she has access to customer's financial data. If he or she commits some sort of fraud or theft, you would be guilty of "negligent hiring."

Some positions of particular trust require a little more than ordinary due diligence. Failing to deeply investigate someone's professional degrees and licensing could be a serious misstep. For example, a Chicago mental health clinic is being sued for failing to properly exercise due diligence by not verifying the identity of a "therapist" who turned out to be an identity thief without a degree or license. Similarly, a law firm found out that one of its partners had been using forged documents to practice law for decades.

You also have to make sure that they are accurate.

Employers are being hit with a new wave of legal headaches by people who have failed background checks and lost jobs because of it. The major retailer, Amazon, and its hiring company, Staffing Co., were hit with a class action suit for denying job applicants the opportunity to correct any mistakes in their background records. There have been other, similar, lawsuits as well. For example, a Phoenix woman lost a job after a background checking company confused her with another woman and told her potential employer that she was a felon.

You need to vet the information you receive by cross-referencing.

An employer can end up feeling like he or she is caught in the middle of a no-win situation: if you don't act on something you see on a background check and hire someone who turns out to be violent or a thief, you open yourself up to a lawsuit. If something on the background check makes you decide not to hire someone and it turns out to be wrong, you could be sued by your potential job hire.

The only real solution is to make sure that you don't rely on cheap background check companies that don't vet their information. Similarly, if you do the background check yourself, you need to do the background check the proper way:

• only use a background check after a conditional offer of employment is made—don't use it as a screening tool to weed out applicants because that gives the applicant no chance to correct errors
• search for convictions, not arrests—consider limiting your search to merely the last 10 years or look for convictions that raise flags only in terms of the position for which the applicant is being hired
• cross-reference any negative finding with public courthouse records—double check to make sure that all of the information on the record belongs to the same person, not someone with a similar name.

Finally, before you take adverse action against a potential hire, make sure that you notify him or her of what the problem is so that he or she has an opportunity to either deny it or offer an explanation.

Business owners always have to walk a careful line when hiring new employees to make sure that they don't end up setting themselves up for a lawsuit by the potential new hire or by customers. If you think you may have a problem on your hands due to an incomplete, forgotten, or incorrect background check, contact an attorney today.