Final answer:
The term that refers to the liability an employer may incur when a firm keeps individuals on the payroll whose records indicate a strong potential for wrongdoing is employment liability.
Step-by-step explanation:
The term that refers to the liability an employer may incur when a firm keeps individuals on the payroll whose records indicate a strong potential for wrongdoing is employment liability. Employment liability refers to the legal responsibility of employers for the actions or misconduct of their employees while performing job-related duties. If employers fail to take appropriate action against employees with a history of wrongdoing, they may be held liable for any harm caused.