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Mixed Messages on Independent Contractor and Employee Background Checks

On January 6th, Massachusetts will implement what its governor touts as “the most stringent ride-for-hire background check system” in the U.S. Uber and Lyft drivers will now be required to pass criminal background checks overseen by a state agency as a condition to picking up passengers in the Bay State. The requirement, which may become a model for other states, raises interesting questions in an era in which independent contractors are becoming subject to increased scrutiny but it is becoming more challenging for employers to elicit information on their prospective employees.

Recent EEOC guidance and a growing number of state and local initiatives have made it tougher for employers to ask about job applicants’ criminal histories. As a result, many multi-state or multi-city employers are moving away from asking criminal history screening questions on job applications, as it has become increasingly difficult to monitor which localities have laws that prohibit or delay the ability to ask about arrest or conviction records. Indeed, employers with multiple outposts in a single state (including Texas) may be able to make criminal history inquiries on applications for jobs in some cities, but be prohibited from using that same application for jobs in other cities that have passed “ban the box” ordinances.

The practice of employers asking fewer initial screening questions is a notable contrast to the trend of heightened scrutiny for contractors that the new Massachusetts law embodies. Can these patterns be reconciled? Could independent contractors such as Uber and Lyft drivers – who are not supposed to be agents of the companies with which they contract – be subject to greater, mandatory scrutiny than employees who are agents of the companies for which they work? And, in requiring background checks, are companies less able to argue that gig economy workers are true, independent contractors and not employees subject to their control?

Mandatory background checks, even for workers who are not classified as employees, also raise questions under the Fair Credit Reporting Act (“FCRA”) the statute that creates various procedural and consent requirements for any background check conducted by a “consumer reporting agency” (a third-party running background checks for profit) in conjunction with an application for employment. If companies utilizing independent contractors become subject to heightened screening requirements – whether due to new statutes or the desire to better insulate themselves from negligence claims – should they comply with the consent and disclosure requirements of the FCRA? While some courts have held that the FCRA does not apply to independent contractors, the U.S. Federal Trade Commission has issued two advisory opinions stating that independent contractors should have the same rights as employees under the FCRA. Uber and other companies have also faced class action lawsuits for not having complied with the FCRA. The safest course of action is probably to comply with the FCRA but to modify the forms used so that they refer to the applicants as “Independent Contractors” and not “Employees” to prevent the forms from being used as an admission that the relationship is one of employer-employee.

The evolution of – and tension between – employee and contractor background check and criminal history inquiry practices bears watching. In the meantime, both traditional employers and companies relying on independent contractors will need to carefully consider federal, state and local requirements when screening their workforce and the implications that their screening practices have on their ability to classify workers as contractors or employees.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.