Background Checks for Contingent Workers Are Tricky

Would it be disconcerting to learn that the newest contingent worker who has been helping you with gathering some sensitive financial data has a recent DUI? Maybe what would be more disturbing is that the fact the staffing firms that supervised the screening knew. Well here’s the kicker.

First, in this case, the staffing firm may not be able to (legally) use the information, as the DUI may not be relevant to the contingent worker’s job responsibilities.  If the contingent were a truck driver, then the staffing firm would be legally obligated to inform the client that the contingent worker’s driving record may cause a dangerous situation for the company. 

The Equal Employment Opportunity Commission takes the position that background checks, including credit or criminal record checks, have a disparate impact on racial minorities, and are unlawful unless the background information is closely related to the job.  "Some states simply forbid using criminal record information in some cases, and in other cases forbid using the information unless there is a close, “substantial” relationship between the crime and the job," says Eric Rumbaugh, employment attorney with Michael Best & Friedrich LLP.

There are many such loopholes and pitfalls around background screening. It’s important to understand how to use this information — and its limitations.

Companies conducting background checks also have to comply with the Fair Credit Reporting Act (FCRA), the federal law that governs this area. The FCRA governs how the third parties that perform most background checks operate, and how companies that obtain consumer reports can use them. Under the FCRA,, candidates have an opportunity to learn about and refute any derogatory information.  The name Fair Credit Reporting Act is misleading.  Many businesses obtaining reference checks or criminal record reports on applicants think they are not obtaining “consumer reports.  However, almost all background checks obtained by employers from third parties are considered “consumer reports” under the FCRA, whether or not they contain credit information..

Plus, background checks can be costly to obtain.  They can range from a few dollars to find addresses to hundreds of dollars for more extensive investigation. Typical packages ordered range from about $30 for basic criminal searches to $100 for packages that include more extensive criminal searches (e.g., Federal Criminal and Terrorist Watch List) as well as employment verifications and motor vehicle records searches.

So suppliers and customers should use legal counsel to mitigate any risk around the use of background checks.  You don’t want to land in a potentially complicated legal wrangle just because you didn’t take the right precautions before screening your contingent workers.

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