Rules That Apply to Background Checks for Independent Contractors in the United States (US)

Background Screening | September 20, 2022

There is a saying that “rules are made to be broken.” However, when it comes to background checks for independent contractors, following this saying will do nothing but get your organization into trouble. 

This blog will cover the rules, or in the case of background checks, regulations, and legislation, that are in place to protect the individuals that are the subject of the background check, their privacy, and the process of handling personal information. The relationship your organization has with independent contractors is different than with your direct hires but many of the same rules apply. They are not flexible, or negotiable, and serve very defined purposes…even when the legislation itself may be preemptive, unclear, and constantly changing. Even when the law may not apply to the contractor’s situation, extending the rights and protections to a contractor and acting in their best interest is a valid business consideration. 

The laws we will cover are like those in the direct hire (employee) space but also apply to independent contractors in most cases and include:

• Consumer Reporting Acts – state and federal
• Ban The Box / Fair Chance Laws – city, county, and state
• Privacy Laws – state (for now)
• Drug Testing (Marijuana) Laws – city and state (for now)

Consumer Reporting Acts

Perhaps the most known, enforced, and important regulation to address is Consumer Reporting Acts. This category of legislation is to protect the individual upon whom a background check report is compiled and afford them rights when the information in that report is obtained, retained, and used in deciding between them. The most notable law is the Fair Credit Reporting Act, or FCRA, which has federal application, and despite its name extends beyond just credit information. Some states may also have consumer reporting acts that govern the use, collection, and retention of individual (“consumer”) data, and in some cases may be preempted by federal law and in others, the state law will take precedence. 

At a high level, the process for compliance with consumer reporting laws includes

1.  Disclose on the nature and scope of the searches to be completed should be a single document that is “clear and conspicuous” and provided to the consumer before any consumer report is requested.
2. Consent and authorization by consumers must be provided in writing.
3. Maintain accuracy of reporting.
4. Adverse Action Process, which includes A Summary of Rights and a copy of their report.
5. The process to dispute the accuracy or incompleteness of information.
6. Provide access to copies of any report(s) or files held on them.
7. Safeguarding and proper destruction of all personal information used to compile and contained in the consumer report

There are certainly some variations across jurisdictions that maintain consumer reporting laws but the general premise is the same – allow the individual consumer participation in the process, treat them fairly and safeguard their information. 

Ban The Box (BTB) Laws / Fair Chance Ordinances

The Ban the Box movement seeks to open opportunities for individuals with past criminal convictions and promote fair hiring practices by eliminating restrictions on individuals who may otherwise be excluded from consideration because of their criminal record history. This movement has also given rise to the more common term “fair chance hiring.” 

When originally launched, these initiatives prohibited questions about past criminal convictions, most typically on the application form, and specifically at issue is the question, “Have you ever been convicted of a criminal offense for which you have not received a pardon?” The effort was designed to “ban” the use of this check “box” on applications so that the information would not be gathered. 

Through Ban the Box protections, individuals are meant to be considered for opportunities based on their work experience, skills, and education; with the criminal conviction considered only later in the process. The Equal Employment Opportunity Commission (EEOC) contends that if employers have access to criminal conviction history, they will use it in their assessment. The desire is to focus on an individual’s suitability for the role before criminal record information is considered.

Under most Ban the Box legislation, the restriction applies only to when the information is gathered and is not a complete ban on obtaining criminal record information. However, over the last decade, these protections have grown to be far more expansive and now may include additional requirements at the application, interview, job offer, or hiring stage. They may dictate how and what information can be used, how far back information may be obtained, and even how long an individual has to dispute a matter impacting the decision about them. The EEOC opposes the blanket use of criminal record information in employment/contracting and has promoted individual assessment and consistent processes to review criminal record details for many years, but the BTB movement leapfrogs that approach significantly.

These ordinances, laws, and regulations are further complicated because many are enacted on public or private employers only, may apply at the city, county, or state level OR all of these. This can make compliance difficult at times for the organization, and confusing at best for the individual subject. 

Background Checks for Independent Contractors Privacy Laws – state (for now)

Historically, the US has been somewhat cavalier when it comes to the privacy rights of the individual and more importantly, their data. The FCRA, noted above, was the general approach for decades. More recently, however, and led by California, many US states have enacted privacy legislation to cover the use, collection, and access of the personal information of millions of Americans. 

With many organizations being, or becoming, global in nature, the privacy approach which has been entrenched around the globe, has only recently taken a foothold in the US after the implementation of the European Global Data Protection Regulation (GDPR) and many of the more public social media platforms challenges about how personal information has become a commodity and is being used without the individual’s consent. This is not to say that privacy regulations are not important, but like other laws, when jurisdictions aim to regulate matters that cross borders, it becomes very difficult to understand, comply and follow. What is also happening is a patchwork approach as some states jump on the privacy bandwagon while others do not. On top of that, the current Administration has also introduced federal privacy requirements that need to be considered. 

Drug Testing (Marijuana) Laws – city and state (for now)

The legalization of marijuana has impacted independent contractor screening not only for the actual drug testing process, but many components of the background check process have also been caught up in these changes. For example, the decriminalization of marijuana in some areas has resulted in previously reported convictions being deemed no longer reportable on background check reports. Your background screening partner will be able to support you through these changes, but it does mean that the access to data and parameters of background checks has changed through the legalization efforts. While legalization tends to be at the state level, some of these other reporting changes on records may occur at the city level. Marijuana legalization is also being contemplated at the federal level, which will bring similar pre-emption and compatibility concerns as the privacy legislation. 

Summary

While these are not all the rules that need to be considered when background checking independent contractors, they are the main ones that need to be taken into account. As noted, the overlap and conflict that can exist between these can become a real juggling effort for an organization, and partnering with risk mitigation and screening expert can help your organization achieve compliance. In addition, these laws and regulations are continually changing, being revised, and being created at the various jurisdictional levels. Staying on top of this is a full-time job but it may well be one of the most important jobs to do related to your contractor background checking process. 

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.

About PlusOne Solutions

PlusOne Solutions help businesses create safer working environments and protect companies from the associated financial, legal, or reputational risks of hiring contractors and vendors. To learn more about how PlusOne Solutions can help an organization with COI management, visit https://www.PlusOneSolutions.net.