Addressing
the Risks of Contingent Labor
Case in point: In 2009 in Los Angeles, it was discovered that a convicted sex offender was employed as a temporary employee at a health clinic for a lengthy amount of time. When the clinic uncovered the criminal history of this temporary employee, the staff realized that they had no process in place to determine how many of their 2,000-plus temporary employees had undergone criminal background checks. As a result, the clinic suspended the contract it had with its largest provider of temporary employees. In 2003 in New Jersey, a woman was stabbed to death by a home health care worker and it was discovered that the employee had previously been fired for misconduct by another agency. A jury awarded the victim's family $40 million. Contingent Workforce Risks The contingent workforce for many organizations may include a broad range of higher level positions as well as administrative and support staff, often categorized as temporary employees, vendor employees, and contractors. In comparing the prior results of background checks of same company permanent hires to contingent workers, HireRight found in a study that candidates for contingent jobs were 92 percent more likely to have a felony record, 50 percent more likely to have a misdemeanor record, and 49 percent more likely to have a positive drug result. The increased risk of contingent labor displayed in this example is due in a large part to the fact that background checks are often not included in the hiring processes for temporary labor firms, or of smaller firms that are often suppliers to large firms which perform background checks on their extended workforce. This example also illustrates how the same safety and security risks associated with permanent hiring exist with contingent workers, to a greater degree. Potential risks of property or data theft, workplace violence incidents, and negative publicity are all present in this pool of workers. In fact, there are a wide range of contingent labor risks and liabilities that organizations must get their arms around and proactively address in their employment and security policies and procedures. Such items include: policies regarding payment of wages, including overtime, and taxes; liability for industrial injuries; disclosure and protection of trade secrets; discrimination claims; and negligent hiring and employment claims. Some of these risks can be mitigated through contracts that are well designed and others can be addressed with effective background checking policies and procedures. Co-employment One key question that arises for organizations regarding the contingent or extended workforce is the issue of co-employment and how that impacts employer liability. Co-employment is an arrangement where a worker has concurrent employment relationships with two or more employers with respect to the same work. Employers often believe that if they pay a vendor for labor then that vendor should assume all legal responsibilities. Some applicable laws, however, may still hold the employer at least partially liable, so organizations should develop strategies to address and reduce these potential risks. So, will conducting background checks on contingent workers put you at risk of co-employment? The answer is generally no. The practice of conducting background checks on contingent workers as part of an organization's security policy, by itself, is not grounds for co-employment. Direct and Indirect Engagement There are two primary ways to conduct background checks on contingent workers - direct engagement and indirect engagement. With direct engagement, an employer treats contingent workers trying to fill temporary positions in a manner similar to those trying to fill regular positions and the organization directly conducts similar background checks on all workers. In indirect engagement, the employer mandates and enforces its background checking policies and procedures by outlining specific and defined background checks that must be conducted. To ensure their background checking policy is followed and to protect against non-compliance, employers often conduct audits and include indemnity clauses in their contracts with vendors and partners. To manage the process of conducting background checks on the extended workforce, there are solutions available that allow an organization to address their background checking needs and configure a program to their desired approach and policy. Best Practices One of the most important first steps in designing an extended workforce background checking program is to establish an effective policy. A comprehensive policy should set out the specific background check standards, protocols, steps and procedures, and identify those who are responsible for managing and auditing the program. With standards established, employers must next determine how the standards are communicated, received and adhered to by their extended workforce. One way to ensure the background checking policy is effectively communicated and understood is to include its requirements within vendor contracts at the time of initial engagement or renewal. A global invitation and communication of the policy can be an effective approach in launching or reiterating an extended workforce program. Once a program is in place, regular audits become a key method to confirm compliance. For contingent workers that are issued badges or system credentials, completion of the background check in accordance with standards can be used as a gating item to gain access. Conclusion According to the results of the 2010 HireRight Employment Screening Benchmarking Report, approximately a third of organizations that participated indicated they run background checks on their contingent workforce, a practice that continues to grow in adoption each year. The growth of this risk-mitigation practice is driven by the safety and security liabilities that organizations run if they do not screen this important and growing segment of the workforce. As the contingent workforce continues to grow in size and influence within organizations, employers must recognize the growing security gap driven by this population if background checking practices are not adapted accordingly. By having a comprehensive background checking policy in place, a process to implement and facilitate the program, and effective auditing and enforcement to ensure compliance with the policy, organizations can mitigate unnecessary risks that may be posed by contingent labor, and promote greater workplace security and safety. About the Author Rob Pickell is senior vice president of customer solutions for HireRight, a leading provider of on-demand employment screening solutions. More information can be found at www.hireright.com. |