Recruiting

Should You Hold a Candidate’s Former Employer Against Them?

We hear a lot about negative online employer reviews, especially from an employer-brand standpoint, and how these reviews can hurt your chances at attracting top talent. But what about the jobseekers who come from employers recovering from a prominent scandal? Should recruiters discount them because of where they previously worked?

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That’s one question being raised in the aftermath of the Theranos scandal. For those who are unfamiliar, Theranos was once initially touted as a breakthrough technology company but became notorious for its false claims to have devised blood tests that only needed very small amounts of blood.
A new HBO documentary, The Inventor: Out for Blood in Silicon Valley, has brought the scandal back to the limelight and two CNN Business Contributors, Seth Fiegerman and Sara Ashley O’Brien, recently interviewed former Theranos employees to see how they’re holding up in the wake of these events.

Brief History of Theranos

To grasp the entire situation, you must know the history surrounding the scandal. CNN Business reports, “At its peak in 2014, the blood-testing startup was a darling of Silicon Valley. Theranos reportedly had a $9 billion valuation, a retail partnership with Walgreens, and a board stacked with political heavyweights like Henry Kissinger and George Shultz.”
Just like other tech giants, jobseekers across the nation were scrambling to get into the company’s doors—with the ultimate end goal of creating a cheaper and more efficient alternative to traditional medical tests.
However, according to CNN Business, that all came crashing down in 2015 after The Wall Street Journal published a report “questioning the company’s technology and testing methods. Theranos was sued by investors for fraud and had its blood-testing license revoked by the government. By 2018, its CEO Elizabeth Holmes had stepped down and its labs had closed. In September, Theranos announced plans to dissolve itself.”

Former Employees Struggle to Find New Jobs

With the HBO documentary and a big-budget Hollywood movie in the works—Jennifer Lawrence is slated to be cast as Holmes—the Theranos scandal is back in the public spotlight. As former employees tell CNN Business, this is causing many recruiters to overlook anyone who has Theranos on his or her résumé.
However, it’s not ALL former employees who are getting the cold shoulder—as CNN Business reports, “[t]he people having the most trouble tend to be those who worked at the company for longer, or held higher level positions in certain departments.” Sadly, jobseekers aren’t being denied because of their skill set, they’re being denied because their former employer has tarnished the company’s name.
As one recruiter told a former employee, “he was ‘the most qualified candidate,’ before adding, ‘except for this.’” The recruiter then put a thumb over the word “Theranos” on the former employee’s résumé.

Employers Hold ‘Bad Blood’ Against Workers

Not only is it hard for former employees to find work, but once they land a job, there’s no guarantee it will last.
“Another former employee described working with a young startup only to part ways after being told that their Theranos pedigree might make it harder for the company to raise money,” reports CNN Business. “The former employee is now looking for ‘new career opportunities’ outside their field of expertise after hitting a ‘road block’ in the job search.” Even recruiters are being told to stay away from former employees.
As Sam Wholley—a partner at recruiting firm Riviera Partners—tells CNN Business, “[I] was told by a company that even if a Theranos employee was ‘the best person in the world,’ it still couldn’t hire him or her.” Wholley summed up the company’s logic as the “board would kill me.”
While many in the tech industry have claimed they do not have a policy in place that directly “discriminates” against hiring Theranos employees, the “discrimination” is painfully obvious for some former employees. Again, it is worth noting that not all Theranos employees were aware of what was going on behind the scenes.
“They really did keep people in their own little bubbles,” one former employee told CNN Business. “I think a lot of us were in denial,” said another former employee, adding “I know I was to a certain degree.”

Should You Hire Former Employees from Scandalous Companies?

Unfortunately, for many of these former workers, new employers are directing their misgivings about Theranos at these job seekers. And rightfully so, as these new employers would be putting their own reputations on the line by taking a risk on these candidates.
“Hiring someone from a company with a seedy past also costs an employer more than the average applicant, because they have to spend more time and resources vetting their candidacy,” says Kristen Bahler, for Money.com. “Often, the decision employers land on is a hearty ‘no thanks.’ And the lucky applicants who aren’t swiftly knocked out of the running are usually offered less than market value — partially because of the black mark on their resume, and partially because of all the hoops the hiring staff had to go through on their behalf.”
“There is a lot more that needs to be done in order to protect the reputation of the hiring firm, and that work is costly,” George Serafeim, a professor at Harvard Business School, tells Bahler. “And the cost is being transferred to the candidate.”
Serafeim recently conducted research on the career trajectories of more than 2,000 executives who left companies with headline-grabbing financial scandals, but who weren’t implicated in the misconduct themselves. His research found that applicants from such companies make an average of 4% less than their counterparts.
Over time, these employees would earn at least $12,000 less annually, and the “scarlet letter” may follow them for the rest of their careers. Serafeim’s research also implies that this “stain” could also stunt future raises and salary negotiations.
While Theranos employees will eventually bounce back from the scandal, the next question becomes: at what cost? And we aren’t equipped to provide that answer. But no matter what, always look at the candidate’s skill set and hear them out before discounting them completely.