• Todd Eiseman

How the Gig Economy Impacts Background Screening

The term “gig economy” is becoming something of a buzzword in the business world, but it appears to be more than just a passing trend. There are conflicting reports regarding just how big this workforce of independent contractors and freelancers is – primarily because there is no comprehensive government statistic currently tracking it – but what is clear is that it’s growing rapidly.

But with this shifting employment model, organizations are faced with as many challenges as there are advantages. In particular, we are interested in the impact of the gig economy on background screening. For companies that are embracing this evolving workforce, what does it look like to ensure the competence, safety, and integrity of these workers?

The Growth of the Gig Economy

Most experts agree that the sudden spike in the number of independent contractors was likely sparked by the most recent economic downturn, with people turning to temporary gigs in the face of a stunted job market. This pattern is even more evident in the Millennial generation, many of whom graduated during the recession and found a severe shortage of job openings. Today, 38 percent of this generation are freelancing, in many cases cobbling together several freelance “gigs” to earn a livable wage.

But the trend manifests across all age groups, with the Bureau of Labor Statistics reporting a 56 percent increase in the number of temporary workers since 2005. Furthermore, a recent Intuit study predicts that by 2020, 43 percent of the workforce will consist of contingent workers.

Although many independent workers may have chosen this work model as a result of the recession, it’s clear that there are many rewards that keep them from seeking out a permanent employer now that the economy is on the mend. Most are attracted to the flexibility of the arrangement, as well as the opportunity for greater control over what work they do, when, how, and for whom. On the employer side, the gig economy provides the advantage of being able to hire specialized skill sets for short-term projects, without the added hassle of payroll taxes, insurance, retirement benefits, and more.

Regulatory Concerns Around the Gig Economy

Despite the advantages for both workers and companies, there are concerns from a regulatory standpoint that need to be considered.  There are, of course, relatively familiar issues about legitimate contractor status as regulated by the Department of Labor and the Internal Revenue Service. Furthermore, the EEOC announced that the gig economy will be a strong focus for the agency in 2017. They are concerned about potential discrimination and lack of diversity in recruitment and hiring practices (which extends to background screening). This concern is especially focused on issues regarding federal laws such as Title VII, which protects employees against discrimination, but doesn’t currently apply to independent contractors. It is critical to keep updated with any changes the EEOC may make in accordance with its new priority.

Similarly, there’s the consideration of Ban the Box and Fair Chance legislation and how (and if) these laws apply to independent workers. These laws govern how and when a company can ask a worker about their criminal history. The specifics vary on a state, county, and city level, and all organizations that rely on contractors should be aware of the rules that impact their region, particularly if they operate from multiple locations.

Finally, there is the question of state and local requirements for background screening of independent workers. This issue was recently brought to the fore for ride-sharing companies like Uber and Lyft in regions such as the cities of Austin and Houston and the State of California. All of these areas have enacted strict criminal background check laws in order to protect consumers of these services. However, the problem with the mandated approaches are that many of these laws require FBI fingerprint background screening, which returns incomplete and often inaccurate data, and does not meet Fair Credit Reporting Act (FCRA) standards. Companies that are required by law to administer this kind of screening must be aware of its shortcomings and be prepared to augment the legal minimum to maintain a strong compliance profile.

Maintaining Trust and Safety in the Gig Economy

As companies scale their workforces with the help of the gig economy, ensuring the competence and safety of these workers has never been more important. The hiring process for these individuals is typically shorter and less complex than it would be for permanent employees; in fact, many companies have no formalized procedures in place for handling the recruitment and management of independent workers. But as this workforce grows, so do the risks of skipping the background check.

As more hands and eyes have access to internal information, sensitive data, financial assets, and valued customers, the need to protect the security and integrity of the organization and its customers is vital.  In most cases, the risks associated with in-house employees differ relatively little from those that can be associated with contractor employees. Establishing a robust background screening policy and partnering with a skilled, experienced background screening provider are the first steps in achieving confidence when partaking in the gig economy.

One final point to consider is that independent contractors move quickly; from accepting a contract to starting the project, there is little downtime, which means background screening needs to be fast. Companies must be able to trust their screening partner to deliver rapid turnaround times in order to leverage their independent workforce.

Is your workforce impacted by the gig economy? At easyBackgrounds, we deliver background screening with industry-leading turnaround and unparalleled accuracy. Let us know how we can help you today.

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