If you own a business, you already know you can be held responsible for what your employees do on the job. But you might not realize that you can also be held responsible for who you decide to hire in the first place—and who you decide to keep. This is called negligent hiring and negligent retention. It doesn’t depend on whether the employee was acting within their job duties. It depends on whether you, as the employer, failed to take reasonable care in your hiring and supervision decisions. And that failure can cost you serious money, even if you never told the employee to do anything wrong.

Here is how it works. When you hire someone, you have a duty to use reasonable care to avoid putting other people at risk. If you don’t check someone’s background, or you ignore obvious red flags, and that person later harms a customer, a client, or even a stranger, you can be sued directly for your own negligence. The harm doesn’t have to happen at your workplace. It doesn’t have to happen during business hours. If the harm is connected to the fact that you hired a dangerous or unqualified person and failed to find out about it, you can be on the hook.

The classic example is a trucking company that hires a driver without running a motor vehicle record check. The driver has three prior DUI convictions and a revoked license. On his first delivery, he runs a red light and crashes into another car, seriously injuring the driver. The company tries to say it wasn’t at fault because the accident was the employee’s fault. But a court can say the company itself was at fault for not checking the obviously risky history. The company owed a duty to the public to put safe drivers on the road, and it breached that duty by hiring someone who should have been screened out. Similar cases happen with daycare centers, nursing homes, delivery services, and any business where employees have access to vulnerable people or operate dangerous equipment.

Negligent retention is a different but related problem. That’s when you made a reasonable hiring decision, but later you find out or should have found out that the employee poses a risk. If you don’t act on that information, you can be liable for staying silent and doing nothing. For example, suppose you hire a salesperson who seems fine. A few months in, a customer complains that the salesperson made inappropriate comments and threats. You don’t investigate, you don’t discipline, and you don’t document anything. Six months later, that salesperson assaults a customer at a company event. You can be sued for negligent retention because you had warning signs and ignored them.

The key in both cases is not what the employee did. It’s what you knew or should have known. Courts look at whether a reasonable employer in your position would have investigated more thoroughly, would have fired the person, or would have taken other protective steps. This is a separate legal claim from the usual employer liability for employee actions. In the usual claim—called vicarious liability—you are held responsible for the employee simply because they were working for you. But negligent hiring and retention is about your own direct failure. That means you can’t hide behind the excuse that the employee went outside their job duties. Even if the employee was acting purely selfishly, you can still be liable if your sloppy hiring or supervision allowed it to happen.

So what can you actually do to avoid this? The good news is that the steps are straightforward. When you hire, run reasonable background checks. At minimum, verify employment history, check references, and look at driving records for any job that involves driving. For jobs that involve working with children, the elderly, or vulnerable adults, do a criminal background check and look specifically for violent offenses or abuse. If a check turns up something problematic, don’t just ignore it. Ask the applicant about it, and make a documented decision based on the risk to your customers and coworkers.

You also need to keep your eyes open after the hire. Set up a process for reporting complaints about employees. Take every complaint seriously, even if it seems minor. Investigate promptly, keep written records of what you found, and take appropriate action. If you decide to keep an employee after a serious complaint, you need a clear written reason explaining why you believe they are not a risk. If you can’t write that reason, you probably shouldn’t keep them.

Negligent hiring and retention claims do not require you to have been reckless. They simply require you to have been careless in a way that a reasonable business would not be. And in today’s world, with background checks available cheaply and quickly, courts are less and less willing to accept an employer’s claim that they had no idea. The bottom line is that your responsibility for employee actions starts before you hire, and it doesn’t end when you fill the position. Take that responsibility seriously. Your bank account and your reputation depend on it.