Hidden Risks in Hiring Through Employee Referrals

In this time of hiring difficulty, employers have sometimes instituted an employee referral program.  It can be a reliable, low-cost way to find great talent.  It can also cause a legal discrimination risk, as studies show employees tend to refer people like themselves. 

Employers have been slapped with million-dollar discrimination judgments for homogenous hiring that resulted from employee referrals.  To structure a legally sound referral program:

• Make sure referrals are not your only recruiting tool.  Make sure you post the ad in several locations, social media, your website, public advertising, and internally.

• Open your referral programs to all employees.  Don’t use a referral program for only certain jobs or jobs in certain departments.

• Don’t use referrals as a shortcut.  Put referrals through the same process you would for any hire.  Remind hiring managers you are looking for the best candidate and referrals should only be one part of the pool of candidates you are choosing from.

• Verify qualifications for referrals just a thoroughly as you would any outside candidate.  Not doing background checks on a referral is unacceptable, for example.

• Analyze how new hires came to the company.  If you start seeing referrals as a large percent, you may be at risk!