As the use of contingent workers continues to rise, so too do the business and legal risks associated with these workers. As part of their governance, compliance and risk programs, many organizations are expanding the pre-engagement background screening efforts to further protect themselves.
Background checks can confirm an individual’s identify and right to work and uncover any criminal records that may disqualify him or her from being engaged. Employers have a duty of care to their full-time employees to check the background of contingent workers who may be working alongside its employees.
How an organization approaches its background screening policies is likely to vary depending on which part of the world its contingent workers are located. The aim of this article is to compare the attitude toward background screening in the United States and the United Kingdom.
U.S. and the FCRA
Background checks in the U.S. typically include the National Criminal Database, Social Security Number verification, address history, National Sex Offender Registry check, Education and Employment Verifications and Drug Screening. U.S. employers must comply with the rules regarding background checks and employment screening as set out in the federal Fair Credit Reporting Act (FCRA), which state that organizations must obtain the permission of any prospective employee before carrying out a pre-employment check for employment purposes.
Permissions for conducting background and drug screens would come in the form of a signed document. This is because the Federal Trade Commission has confirmed the term “employment purposes” used in the FCRA applies to independent contractors as well employees. Therefore, organizations should carefully review the wording of any such document used for independent contractors to ensure there is no reference to the term “employee.” Such an oversight can cause headaches down the road should state or federal agencies question the individual’s classification. Screens for other temporaries will be conducted by the third-party provider, so the onus is on the provider to obtain those permissions; however, the organization engaging the workers should still confirm the proper checks are being conducted in accordance with its own policies.
While the U.S. and the U.K. share the goal of enhancing privacy protection for their citizens, the U.S. takes a different approach to privacy from that taken by the U.K. The U.S. approach relies on a mix of legislation, mandated regulation, and self-regulation. Conversely, the U.K. relies on comprehensive legislation that requires the creation of independent government data protection agencies, registration of databases with those agencies, and in most instances, prior approval from the worker before personal data processing may begin. Further, third parties involved in providing pre-employment screening services must be registered with the Information Commissioner as a “Data Controller” and comply with Data Protection Act 1998.
If an organization in the U.K. feels it needs a criminal record check on a prospective employee, it can apply to the Criminal Records Bureau (CRB), which uses the Police National Computer as its principal source of data. A CRB check may reveal convictions, cautions, reprimands and warnings. Organizations registered to access these data are required to comply with a Code of Practice regarding the safe handling, use, storage, retention and disposal of disclosure information provided under Part V of the Police Act 1997.
It is a legal requirement that organizations check whether a prospective worker has the right to work in the U.K., as it is in the U.S. However, unlike the relatively minor fines imposed in the United States, U.K. employers found to be using illegal labor can be fined up to £10,000 (US$16,000) per illegal worker. To comply with anti-discrimination legislation, checks must be done for all prospective workers, including contingent workers.
In addition to the above checks, background screening in the U.K. will typically include reference and credit checks together with identification, employment and education verification. Unlike the U.S., screening for drug use is not common in the U.K. (See Europe: Drug and Alcohol Screening, CWS 30, Aug. 31 issue http://www.staffingindustry.com/site/Research-Publications/Publications/CWS-30/August-31-2011-Vol.-3.22/EU-Drug-Screens)
Due to U.K. tax legislation, it is usually not possible to operate as a self-employed (Sch D) contractor in the U.K. Contingent workers are either structured as employees (Sch E) or work through a Personal Service Company (PSC) in much the same way an independent contractor may operate via a corporation or limited liability company in the U.S. Due to the high number of independent contractors who work through PSCs, it is common practice for pre-engagement checks to be carried out on both the individual and the PSC. Corporate background checks seek to establish whether the company is properly constituted and maintains Public & Employers Liability Insurance, which a statutory requirement.
While there are clearly many similarities in the approach to pre-employment screening, it is essential that CW managers understand both domestic and regional differences and adapt their programs accordingly. It is also important to recognize that legislation in the U.K. is greatly influenced by a stream of EU Directives. CW managers operating in the EU need to monitor these Directives and understand the impact they may have on their organization’s use of contingent labor.
Martin Glick is senior associate of global compliance at Brightfield Strategies LLC, which helps Fortune 500 companies with contingent workforce strategy initiatives, such as program design, VMS/MSP sourcing and selection, and global program compliance. He can be reached at firstname.lastname@example.org.