Refusing Applications from the Unemployed: Best Practice or Madness?

Is it a good idea for firms hiring to purposely exclude the unemployed from consideration? If you missed the news last summer (June 2010) about the growth of this practice, then you might be scratching your head and thinking to yourself, ‘that’s crazy.’ However, for those that follow trends and deal with job postings daily, it’s clear that postings increasingly contain some variation of the phrase “you must be currently employed in order to be considered.” For example, a posting made last week to CareerBuilder by an Alabama restaurant chain made the requirements crystal clear by putting the word “currently” in all caps. “Must be CURRENTLY employed as a restaurant manager” Finding examples of the phrase in use is not difficult; postings can be found on all of the major job posting sites including Monster, CareerBuilder, and Craigslist. The increased usage of this practice can most likely be attributed to a growing percentage of unemployed persons who have remained unemployed for more than 18 months. While not a proven fact, many assume that prolonged unemployment leads to deterioration in skills and knowledge, or obsolescence in roles where knowledge becomes obsolete quickly. Refusing to consider the unemployed is not a practice limited to a few professions. In my research, I found ads for manufacturing roles, medical provider roles, and law firms. This practice raises a great deal of emotion among both the unemployed and advocates of social responsibility. While I have never recommended this practice, corporate recruiting managers should examine both understand the benefits and drawbacks prior to dismissing/adopting it. Drawbacks of Refusing to Consider the Unemployed There are more negative arguments associated with the practice than positive ones, including: • A smaller talent pool — in some cases, layoffs are designed to eliminate poor performers and those with obsolete skills first. However, facility closings also contribute to unemployment, and this hiring restriction would cause you to miss former top performers who were released do the facility closure. If skill obsolescence is the issue driving the restriction, managers need to remember that it is possible for the unemployed to maintain/improve their skills through classes, reading, and self-directed learning. Is also true that some skills like customer service do not deteriorate a great deal during long periods of unemployment. • Potential legal issues — although the practice is not illegal (unemployed people are not a protected class under U.S. law), it may certainly result in an adverse impact if the unemployed population is disproportionately made up of protected individuals. • Employer brand image — this practice may result in a barrage of negative comments and questions from the media, your socially conscious customers, and even your employees. Most firms remove the restriction when the press begins to call. • Lost sales — if the unemployed have been, are now, or will be future customers, you can expect your sales to be negatively impacted if there is a large amount of negative publicity. • Desperate people will ignore it — because unemployed people are “hungry,” it is highly likely that they will work hard and be loyal. It is highly likely because of that hunger or desperation that many of the unemployed will simply ignore your limitation and apply anyway. As a result, you may still have to sort through almost as many applications. • It runs counter corporate social responsibility “talk” – while many firms that claim to be socially responsible rarely move past talking about it, if your firm truly tries to be socially responsible, this practice would most definitely violate all adopted standards. • Missed tax breaks — if you refuse to hire the unemployed, you will miss out on some significant tax breaks. • Lost wage rightsizing opportunity — skills increase and decrease in value, but rarely do firms adjust wages downward. Refusing to hire the unemployed, who would be more likely to accept a reduced wage, ignores an opportunity to help adjust real wages to actual market value. Obviously the ability to adopt this practice and the impact it would have varies around the world and from organization to organization. Government agencies and not-for-profit organizations would never consider such policy, and firms that count the unemployed among their key customers would suffer more economically post adoption. Benefits of Refusing to Consider the Unemployed The primary driver of refusing to consider the unemployed is a desire not to hire someone whose skills have grown rusty, who has lost their contacts, or that possesses outdated knowledge. Some of the other benefits driving adoption of this practice include: • Reduced new hire time to productivity — hiring individuals who are sharp and “not rusty” means that the new hires will reach their “minimum productivity levels” much faster. • Reduced training costs — if new hires have obsolete skills and outdated knowledge because of their long period of unemployment, the organization would need to invest more in training (compared to currently up-to-speed individuals), thus raising costs and lowering the ROI of the hire. • Current contacts are needed — in some jobs, contacts and continuing relationships are essential. Although it is unfair to assume that all unemployed fail to maintain their contacts, it is also sometimes true that key individuals don’t have the same interest in maintaining relationships once someone loses their title and power. • Knowledge of current technology is needed — in jobs where large enterprise-wide technology (both hardware and software) is continually updated, working knowledge of the latest generation of technology is required. Unfortunately, unemployed individuals cannot easily maintain their fluency on technology that is not available to someone outside of a corporation. • Reduced recruiter workloads — reducing the number of applicants (because of recruiter or hiring manager bias against the unemployed) lightens the workload of both recruiters and hiring managers. Because every applicant has the right to file a complaint or to sue, reducing the number of applications could conceivably reduce your legal risk. For resource managers who must calculate the likelihood of success, the question must instead be “what percentage of the unemployed are top performers and is the ratio high enough to justify the cost and time involved.” In a resource-limited process, probabilities must rule over emotion. • Increased learning from competitors — hiring exclusively from among those currently employed increases the chance that you will learn about a competitor’s current best practices during interviews and upon hire. If you want to proactively “hurt” or learn from a competitor, hiring its best current employees is clearly superior to hiring individuals who may not have worked at a competitor previously. • An abundant talent pool — even if firms exclude the unemployed, in most states 90% of the population is still available to them as potential hires. • Lower turnover rates — currently employed individuals are at least theoretically more likely to take a job and stay in it for a while. The unemployed, because of their weak economic situation, may be “forced” to accept any job initially, then may trade up the moment better opportunities arise. Final Thoughts All good recruiters should know what the competition is up to. Whether you agree or disagree with this particular practice, the concept of restricting applications to save time, money, and to avoid legal issues is here to stay. Organizations have begun to learn the most effective and legally viable methods to reduce applications from applicants who have no real probability of reaching the interview stage. Restricting applications from the unemployed is a controversial approach, but others do exist. Realistic job previews, more distinct job descriptions, discouraging text on the application, and requiring applicants to pass a preliminary assessment screening are options for reducing not-qualified applicant volume. Reprinted with permission of ERE Media