The State of Vendor & Contractor Screening

By Michael Klazema on 11/26/2019

For years, employment-related background checks have been constricted by the phrase “employment-related.” Businesses are vigilant about vetting the people they hire to fill full-time positions. Part-timers receive background checks even if they don’t receive precisely the same level of scrutiny. It is other groups of personnel that experience hit-or-miss background check policies: volunteers, vendors, contractors, contingent workers, freelancers, and others whose work relationships don’t follow a strictly traditional employer-employee model.

As the gig economy grows, it is vital to acknowledge the state of the union for vendor and contractor background checks.

In 2018, more than a third of United States workers were a part of the gig economy. This section of the population is no longer insignificant. Within a decade, there is a very high chance that most professionals will be working on a freelance, contract, or contingent basis. Employers will need to adapt their background check strategies to stay competitive and protect against the risks of hiring unvetted personnel. It doesn’t matter anymore if personnel aren’t considered “employees”—what matters is that they are representing the business or brand.

Already, we have seen multiple instances in which thorough contractor or vendor screening may have prevented harm or reputational damage. Ridesharing services such as Uber and Lyft have faced a firestorm of controversy over their background check policies and the number of assaults and other crimes that have occurred at the hands of their drivers. A recent report has made a compelling case that poor background check policies may have led to the hacking of a state election vendor’s data in Florida. Since many election functions are carried out by private vendors, the report argued, it is crucial for governments to understand how vendors might be compromised by external influencers and other factors without proper oversight.

In New York City, the push to give contractors the same rights and protections as employees has escalated to the point of legislative changes. In September 2019, the NYC City Council approved a proposal to expand the city’s Human Rights Law to apply to independent contractors as well as traditional employees. Employers running criminal background checks on contractors must now follow the same protocols that they would follow for any employee. Specifically, if a prospective contractor does have a criminal history, the employer must go through an eight-step process to determine if that conviction is relevant to the role at hand or poses a genuine risk.

Employers must strike a balance. Running criminal background checks on all contractors—and making those background checks as thorough as they would be for full-time employees—blurs the lines between what constitutes an “employee” and what doesn’t. Employers don’t need to start considering every one of their contractors a full-time worker. Rather, they need to be more conscious of giving contractors (or prospective contractors) the same rights as any full-time employee with less pre-employment scrutiny.

Companies can’t ignore the importance of contractor background checks and vendor screening as the gig economy grows, but they also can’t ignore the laws or privacy rights that apply to those background checks. For help establishing compliant but effective contractor and vendor background checks, read our white paper on the subject and visit our Learning Center.

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