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Background Checks for Independent Contractors in the Wake of COVID-19: 4 Areas to Consider Moving Forward

By Bryan Pena | ,

Updated Monday, August 31, 2020

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When we consider the multitude of complications that were anticipated as a result of the COVID pandemic, few professionals would have called out the challenges of conducting background checks as a limiting factor.  In fact, the inability to conduct such checks in a timely manner has become a critical chokepoint in bringing on new independent talent.  Some checks that used to take a few days are now taking weeks or even longer.  This translates to lost talent, a poor client experience and significant opportunity costs. 

A recent virtual roundtable, I was joined by was joined by Eric Rumbaugh,  the leading industry expert on contingent workforce legal issues and intellectual property protections, where we discussed backgrounds checks in depth with many of our client organizations.  In the interest of knowledge-sharing, I’ve recaped some of the most interesting questions and responses.

Drug Testing – Yea or Nay?

Many companies wish to implement a straightforward policy regarding background checks and drug testing. However, marijuana, which has recently become legal in many states, is particularly interesting.

“The short, simple textbook answer to this is: marijuana is still illegal under federal law,” Rumbaugh noted. “You can still test for marijuana if you want, and you can still refuse to hire people who fail a marijuana test.”

Rumbaugh called enforcement a “terrible pain” and indicated instead that issues regarding drug testing should instead drive a more difficult conversation around business need. For many jobs, such as DOT drivers, defense jobs, or public safety jobs, yes, testing for drugs like marijuana is a need. For other jobs, companies may wish to consider if it’s necessary for your operation, or part of “your corporate DNA.”

Rumbaugh concludes with this: “I wouldn’t say a majority but a critical mass of businesses are deciding not to test for marijuana.” He goes on to say that the decision ultimately lies with the company, particularly if use could injure the worker or others. Companies may also want to align their marijuana policies with their policies on alcohol use.

He also cautions that companies should be on the lookout for rising abuse of opioids, which are measured on standard 10-panel tests, but not five-panel ones. “Looking at what you are going to be doing with marijuana is a good time to find out what you’re doing with non-prescription use of prescription opioids as well,” he concluded.

What About Doing Away with Background Checks Entirely?

A practical as well as philosophical question was also raised: what are the risks companies would assume if they completely did away with some or all of the background check process for select roles?

Rumbaugh was adamant that many companies are “getting background checks wrong.”

Many companies fail because they use the process they’ve always used, without critically analysing what needs to be done or what they are truly checking for. If a company is truly going to succeed, they must implement a thorough study of why they are checking and match factors to those reason. For example, if you are a financial services company, for example a bank, savings and loan, a credit union or insurance company, you’re legally required to screen for people who’ve been convicted of what’s called a crime involving dishonesty, which is a defined term, and you must do a check for it – it’s not an option.

Also, every state, if not almost every state has what is called caregiver laws. This means if you’re doing work with people, in day-care, and nursery, school, hospital, you’re required to screen for certain crimes and you’re not allowed to place people as your direct hire, or as a contingent worker, if they’ve been convicted of those crimes,  you have to do caregiver checks if you’re in a caregiver affected industry.

These are just two examples of industries where doing away with background checks isn’t on the table, although companies could (and should) make sure they are checking for the right data.

The short answer: “if you’re contemplating jettisoning your background checks for some jobs or shortening them for others, check to see what the law requires, second, check to see what you’ve contracted yourself into.”

From there, check with your insurance broker. Many companies conduct background checks as they believe it will be negligent not to do so. Your broker can help tailor background checks to what Rumbaugh termed “actual risk experiences” for particular types of roles.

When Passing Over Someone for a Role Can Mean Lawsuits

Similar to the background check issue, we discussed a sticky wicket that comes up from time to time – is a company incurring risk if they decide not to engage someone as a result of a background check who has been charged, but not yet convicted of a crime?

According to Rumbaugh, the answer is a hard yes, stating that “an arrest that is not charged and is no longer pending is just verboten to use under many state’s laws. It is also verboten under federal law.”

The takeaway here is to avoid an overbroad background check, and to make sure the check is job-related and business-necessary.

“Otherwise, any disparate impact is unlawful discrimination, regardless of your intent,” he says.

He also recommends that background check documents be updated to comply with the Fair Credit Reporting Act periodically, as documents that start out compliant can become non-compliant after several years.

A best practice is to regularly check your rubric for how you are doing background checks. It may be subjecting you to violation of different state laws or federal, under state or federal law, or even race discrimination; overbroad backgrounds checks unjustly discriminate against people of color. 

And then lastly, he says, and this should be done under attorney-client privilege: you should do a self-statistical analysis to see if you are having a disparate impact. He suggests to periodically give yourself an Attorney-client privileged report card on how you’re doing on disparate impact for your direct hires and for your contingents.

I hope you enjoyed this recap of our ongoing legal series – we’ll have more next quarter.

Conclusion

The COVID pandemic has highlighted the need for companies to re-examine their existing processes and procedures across the board, and background and drug checks are just one part of an going future of work puzzle.  It is important to continually evaluate your background checking policy considering current economic realities.  The goal is to ensure are not exposing your organization to undue risk while creating unnecessary friction, only by doing that can you be best equipped to tackle the challenges of the future workforce.

Eric and the experts at MBO have created a position paper on background checking best practices as well as some references to recent case law.  For this valuable resource and to learn more about how MBO can help you become a Client of Choice to top independent talent please contact enterprisesales@mbopartners.com or complete the form below.

The information provided in the MBO Blog does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs.  Before acting on any information in the MBO Blog you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing.