New Gig Economy Will Force Employers to Strengthen Screening of Growing On Demand Workforce

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Written By ESR News Blog Editor Thomas Ahearn

The fast growing “gig economy” that focuses on temporary work – or “gigs” – accounted for 30 percent of new jobs and created new income sources for 2.1 million people in the United States between 2010 and 2014, according to a 2015 American Action Forum Report. The fact that employers will need to strengthen screening for the growing on-demand workforce in America is Trend Number 4 in the Employment Screening Resources® (ESR) 10th annual ‘ESR Top Ten Background Check Trends’ for 2017.

“The gig economy that focuses on temporary work such as transportation applications, house sharing services, and numerous other part-time services should still be subject to some sort of background check process, although the process may require a different approach than what is used in the full-time economy to ensure safe workplaces,” says ESR founder and CEO Attorney Lester Rosen. The list featuring emerging and influential trends in the background check industry for 2017 will be available at www.esrcheck.com/ESR-Top-Ten-Background-Check-Trends.

The gig economy shows no sign of slowing. According to a report from Intuit, 7.6 million people will be part of the on-demand gig economy by 2020, and that slice of the labor market will grow by 18.5 percent per year over the next five years. The Intuit report also revealed a broader trend in the U.S. within the “contingent” or “independent contractor” workforce which has grown “from 17 percent of the U.S. workforce 25 years ago, to 36 percent today, and is expected to reach 43 percent by 2020.”

Other research documenting the rise of this growing trend in America indicates the gig economy is much bigger than employment data suggests. A story at Fusion.net revealed the number of Americans filing a 1099 tax form that gig economy workers must file increased in the 2000s. Another Fusion.net report found increases in the share of 1099 workers in many major U.S. cities and that a recent survey revealed 60 percent of “9 to 5” workers get at least 25 percent of their income from work outside regular jobs.

To keep up with the fast growing gig economy, Rosen explains that firms that supply on-demand workers need to process a great many individuals very quickly. As a result, the ability of a background screening firm to leverage the latest technology becomes more critical so that firms may quickly process peer to peer workers. “A screening firm such as ESR that provides state of the art technology and integrations can assist an on-demand firm in meeting these needs,” says Rosen. “ESR has long provided employers and on-demand firms the ability to utilize its advanced integrations utilizing a RESTful JSON API to seamlessly build an engine to enable check that are both accurate and fast.” To learn more about the ESR Background Check API, visit www.esrcheck.com/ESR-Background-Check-API/.

Some states have already strengthened background checks of gig economy workers. As reported by ESR News in August 2016, Massachusetts passed bipartisan legislation – Bill H. 4570 – to regulate drivers of  “Transportation Network Companies” (TNCs) such as Uber and Lyft by requiring them to undergo a full state Criminal Offender Record Information (CORI) background check, including sex offender registry status, and a bi-annual national commercial background check conducted by the TNC.

In October 2016, ESR News also reported that the U.S. Equal Employment Opportunity Commission (EEOC) – the agency responsible for enforcing federal laws prohibiting discrimination in employment – approved an updated Strategic Enforcement Plan (SEP) for Fiscal Years 2017-2021 that reaffirms the EEOC’s commitment to advancing equal opportunity in America’s workplaces while also recognizing new areas of potential concern such as complex employment relationships in the emerging gig economy.

The EEOC SEP for 2017-2021 categorized the 21st century workplace known as the gig economy – where temporary work and independent workers are commonplace – as an ‘Emerging and Developing Issues’ priority area: The Commission adds a new priority to address issues related to complex employment relationships and structures in the 21st century workplace, focusing specifically on temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.

According to Wikipedia.org entry for “Contingent Workforce” that cites data from U.S. Bureau of Labor Statistics (BLS), the non-traditional gig economy workforce includes “multiple job holders, contingent and part-time workers, and people in alternative work arrangements” and “nearly four out of five employers, in establishments of all sizes and industries, use some form of nontraditional staffing.” People in “alternative work arrangements” include independent contractors, employees of contract companies, workers who are on call, and temporary workers.

The “gig economy” is sometimes also referred to as the “sharing economy,” the “Peer to Peer” (P2P) economy, or the “1099” economy— from the Internal Revenue Service (IRS) tax form used to report various types of income other than wages, salaries, and tips on the Form W-2—since workers are typically not employed in the traditional sense.  As Rosen explains in the upcoming 3rd edition of “The Safe Hiring Manual” that is due to be released in 2017:

In the gig economy, a consumer is able to “rent” or share assets owned by someone else.  Examples are housing with firms such as Airbnb or transportation with firms such as Uber, Lyft, or Sidecar where car owners “share” their vehicle with others. Other examples of the sharing economy can include sites that provide access to caregivers and babysitters, home repair workers, housecleaning, delivery of groceries, meals, and dry cleaning, tutors, or a host of other services where providers and customers are brought to together by technology. Advances in technology have enabled such sharing to occur by providing real-time information to both providers and users.

In the section “Background Checks and the “Gig” Economy?” of the book, Rosen explains: Technology companies take the position that they are enabling the service but not actually providing it. For example, a company that provides technology that allows ride sharing would dispute an argument they are a transportation company. However, a problem with the sharing economy is that even though technology firms provide solutions to enable peer to peer sharing, the public, legislators and regulators are concerned that without background checks, users of these services can be harmed.  Even though the technology firms deny they are service providers, safety concerns are still paramount.

Background checks will be an ongoing focus of concern in the “sharing economy” built around the sharing of human and physical resources in such industries as transportation, short-term housing rentals, temporary job assignments, or services on demand. These types of background checks fall outside the traditional employer-employee situations but are nevertheless critical as users of these services are concerned with the integrity of the service providers or renters. However, the standards for what constitutes a background check remain elusive since there is no one definition or generally accepted standard.

In determining how much effort, money, and energy to put into background screening non-traditional workers in the gig economy, Rosen writes that an employer should consider two factors:

  • Use consistency. The same level of screening used for similar positions should be used for a position that is to be filled by a non-traditional worker or else the firm may be subject to allegations of disparate treatment of similarly situated people.
  • The duty to hire with due diligence. This basic rule still applies. An employer is negligent if they hire someone who the employer either knew or should have known, in the exercise of reasonable care, was dangerous, unfit, or not qualified for the position.

However, Rosen also explains that there is no national standard for background checks in the gig economy: Even though companies that facilitate Peer to Peer activities have a vested interest in assuring consumers that their service is safe, there continues to be no national standard as to what constitutes an appropriate background check in the sharing economy.  Each provider is free to establish its own criteria.

Rosen goes on: This leads to a number of issues. First, there is no agreed on or standard definition of what exactly constitutes a background check.  Background checks can range from a cheap and instant database check which is practically worthless in many areas of the United States all the way to an in-depth investigation including interviews with the candidate or past employers, and many variations in between.

Rosen explains that, as the gig economy grows, stories of consumers being harmed by criminal acts of providers can be expected to increase. Given the negative fallout from such publicity to any firm in the Peer to Peer space, it would seem that an effort to create some standardized and generally accepted background screening protocols would be of great benefit to both providers and consumers.

As an example, Uber has been involved in several court cases regarding background checks of drivers since the company’s creation. In April 2016, Uber agreed to pay at least $10 million to settle lawsuits filed by district attorneys in San Francisco and Los Angeles that claimed the company misled passengers about the quality of driver background checks, a figure that could rise to $25 million if Uber does not fully comply with terms of the settlements.

San Francisco and Los Angeles prosecutors sued Uber in 2014 for falsely claiming its driver background checks were the most comprehensive available. The lawsuit noted that prospective Uber drivers did not undergo fingerprint checks like taxi drivers do but instead underwent background checks that included a name search of other criminal databases and motor vehicle department files.

In February 2016, ESR president and chief compliance offer Brad Landin wrote an opinion piece that was posted on CNN.com about the alleged shootings by an Uber driver in Kalamazoo, Michigan. In “Vetting Drivers in the Age of Uber,” Landin wrote how the shooting deaths of six – where the alleged gunman supposedly picked up fares while driving for Uber during the killing spree – raised questions about personal safety in the gig economy where strangers use software applications to provide services for each other.

Landin wrote: Jason Brian Dalton – who is facing murder, assault, and firearms charges – apparently had no criminal record, so a background check would not have helped exclude him. Yet, the case raises questions about personal safety in the so-called “gig economy,” where total strangers are invited into your life through software applications to provide a host of services, ranging from transportation and housecleaning to babysitting and acting as a personal assistant.

Landin went on to explain: In the gig economy, there are so many moving parts that it is hard to know just how much due diligence a company is using. For example, if a service engages someone through an online application without ever meeting him or her, there is the question of whether the person being researched is actually the person who is applying for the job. In a standard employment situation, the employer – at some point – meets the person and engages in some sort of identity verification. That may not always be the case in the gig economy, where people may sign up through a software application, sight unseen to provide ad hoc services.

Landin concluded that “safety goes beyond just the background check”: Third-party gig economy application providers such as Uber, Lyft and others like them can build in safety protocols that can be very effective for their services. Background checks are complex, and consumers are entitled to know exactly what measure of safety they are getting. The opinion piece by Landin is available on CNN.com at: www.cnn.com/2016/02/23/opinions/uber-driver-background-check-landin/index.html.

ESR Top Ten Background Check Trends for 2017 Webinar

Employment Screening Resources® (ESR) founder and CEO Attorney Lester Rosen will host a live complimentary webinar entitled ‘ESR Top Ten Background Check Trends for 2017’ on Wednesday, January 18, 2017, from 11:00 AM to 12:00 PM Noon Pacific Time. To register for the free webinar, please visit https://attendee.gotowebinar.com/register/733293271056375556.

The webinar is approved for 1.0 (HR (General)) recertification credit hours toward PHR, SPHR, and GPHR recertification through the HR Certification Institute (HRCI). The webinar is worth 1.0 Professional Development Credit (PDC) from the Society for Human Resource Management (SHRM) for the SHRM Certified Professional (SHRM-CP™) and SHRM Senior Certified Professional (SHRM-SCP™).

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