July 25th, 2018 | David Bloom, Sterling Talent Solutions

Be in the Know: Compliance in the Sharing Economy

The US economy has changed dramatically over the last 50 years from stable employment in large organizations to an increased reliance on temporary or contracted labor (with an emphasis on service and tech industry jobs). While the manufacturing world has shrunk, the On-Demand workforce (or gig economy) has grown. Freelancers are relying on websites and apps like Handy, Care.com, Lyft and TaskRabbit to connect them with paying jobs.

Compliance in the Sharing Economy

Freelancers and contractors often have the same access to company resources, sensitive information and customers as their full-time co-workers. Their bad behavior can impact customer and employee safety and your brand the same way. A thoughtful background check program is an important line of defense. Unfortunately, while regulations surrounding background checks are strong and complex, there is no standard for what a check should include, and the Federal, state and municipal governments continue to debate are active. It is hard to stay current

Step one in managing an effective, compliant screening program is to know which regulations are operative in your geographies and industry segment. Step two is managing the information flow in ways that protect and your business.

Fair Credit Reporting Act (FCRA)

First in the line of regulatory requirements to be aware of is the federal Fair Credit Reporting Act (FCRA). The FCRA, a consumer protection law dating back to the 1970’s, outlines how to inform candidates of background checks, how to use associated data, and how to manage the data once a check is complete. A key takeaway for companies related to the FCRA includes understanding how your background screening partner complies with these standards. Another important thing to look for is the National Association of Professional Background Screeners (NAPBS) certification for the FCRA. NAPBS certification signifies your background screening provider has a core understanding of foundational information of the FCRA.

Ban the Box laws

Ban the Box laws prevents employers from asking job applicants about their criminal history on the initial applications.  In fact, Ban the Box legislation is spreading rapidly across the United States. Currently, over 15 states and over 100 cities and counties have adopted laws associated with Ban the Box. Each locality’s legislation has slightly different requirements and exceptions.  As Ban the Box laws continue to become more the rule than the exception when background screening potential employees, companies need to understand all associated legislation as it determines what criteria can be used to vet a candidate in a background screen.

Transportation and Zoning Laws

Other areas where sharing economy companies are seeing legislative activity includes transportation and lodging.  The division between a platform’s managers and its users creates a blurry regulatory line.

Both Uber and Airbnb have gotten pushback over taxi and hotel regulations in cities such as New York and San Francisco. For example, some ride-sharing companies compete with taxi companies and don’t require the same level of insurance or screening. Additionally, temporary rentals may not always comply with local zoning laws. Sharing economy consumer protections are evolving. Going forward drivers and property owners may receive more thorough background checks and maintain a minimum level of insurance coverage.

California established a new category of motor vehicle carriers known as Transportation Network Companies that do not recognize ride-sharing companies as a taxi service and require drivers “to have certain insurance, perform background checks, and maintain drug and alcohol policies to ensure drivers are law-abiding”. Washington, D.C.’s “Vehicle for Hire Innovation Amendment Act“, is also aimed at regulating sharing economy transportation. The act enforces background checks and inspections and specifically discourages the manipulation of fare charges.

Ever-Evolving On Demand Economy

The On Demand economy is revolutionizing consumer behavior – whether customers want an on demand landscaper, doctor, stylist, masseuse or another type of service provider trust, safety and professionalism are essential. It is still early days about the emerging regulatory landscape in the sharing economy. However, it is clear background checks are a key focal point for compliance in the sharing economy. The Sterling team has deep subject matter expertise when it comes to understanding regulatory requirements. Our team of compliance professionals continuously monitors legislative and regulatory bodies to ensure our customers are compliant. We also host quarterly FCRA updates webinars to keep you in-the-know of the latest legislature that impacts the background screening industry.

Partnership, Education and Communication

Startups know that market insight is the first step in building a successful business, but execution is everything. This is where your background check provider comes in. The right partner should understand the nuances of your regulatory picture, be able to communicate the relevant issue, and help you weigh the risks of different approaches to program design. This is especially critical when a business starts to scale and is more likely to be on the radar of regulators. To pick the right partner ask three questions:

  1. Do they really know compliance? The regulations are complicated and a successful defense against a lawsuit, or successfully identifying applicants that pose a risk to your business can come down to very fine distinctions. You can only make those distinctions with experience.
  2. Do they ever say no? A startup’s focus on customers is what helps them succeed. But optimizing every experience for customers can put you at risk for a compliance violation. If your screening partner never says no to an idea they may be saying what you want to hear instead of what you should hear.
  3. Do you want to work with them? Background screening is complicated no matter how simple we want it to be. Like a good product leader, your compliance partner should be effective at helping you weigh risk and opportunity, communicate hard messages and help you solve the problem. If they can do these things well, you’ll want to work with

At Sterling, it is our singular mission is to help our clients hit their goals and keep their businesses and platforms safe. Our technology is top notch, our focus on service in our DNA, and of course, our compliance professionals are the best in the business. If you think we can help you, please reach out. The team and I are standing by.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.