Trends in the Gig Economy: Will the Need for Due Diligence Increase?

Although the Gig Economy is not a new concept in the U.S., it has seen some significant growth in the last few years, not surprisingly due to technological developments. According to a 2015 study by the American Action Forum, the number of workers in the gig economy grew from 8.8 percent in 2002 to 14.4 percent in 2014. Furthermore, independent contract workers grew by 2.1 million people from 2010 to 2014. The growth of the gig economy is sure to have first hand effects on the employment sector in more than one way.
By Ariella Serman
August 2, 2020

What’s the Gig on the Gig economy?

The term ‘gig economy’ was created during the financial crisis of 2007-2009 when many people started to make a living through gigging—working part-time jobs whenever and wherever available in order to supplement their lack of stable income. Today, gig workers usually constitute independent contractors, freelancers, self-employed individuals, or any work arrangement outside of the traditional fixed income-earning activities.

Although the exact definition of a gig economy worker has not been succinctly defined, the American Action Forum report estimated that with a narrower definition of the gig economy (eliminating some positions that are arguably related) this sector grew from 18.9 million to 20.5 million workers and, with a broader definition, grew from 26 million 29.7 million workers from 2002 to 2014. In the latter half of this time period, between 2010 and 2014, the number of independent contract workers increased by 2.1 million people, which accounted for 28.8 percent of all jobs added in the workforce during that time period.

Due Diligence in the Gig Economy

With the growth of the gig economy, there is an increasing number of background checks that will have to be performed on all of these workers. Take for example the car-sharing services, Uber and Lyft. Although they had conducted lower-level background checks previously, both companies have reported an increase in their investment in due diligence on their drivers to ensure the safety and security of their riders. This announcement came after media backlash about both companies in which various sexual misconduct and assault allegations were brought forth on their drivers. Uber released a statement claiming that, in 2017 alone, more than 200,000 people failed their background check process.

The challenge with performing background checks on gig workers is that employers and clients want quick and easy assurance that the independent worker is clear so they can begin work activities as soon as possible. As the hiring process is shorter and less complex, employers want the due diligence process to be shorter as well. However, seeking surface-level assurance rather than delving into the details to uncover the truth can result in unsound and negligent due diligence operations.

Screening Still Worth It

Despite the complications with performing background checks on gig workers, screening is beneficial to businesses, as it ensures higher quality job candidates, an increased level of safety and security, and enhanced regulatory compliance. However, businesses may have to adapt the screening process for independent contract workers based on the nature or demands of the job.

Melissa Sorenson, the executive director of the National Association of Professional Background Screeners stated that, “Background screening is not one-size-fits-all… Employers are getting much better at recognizing they need to tailor a background screening program.”

Using independent third-party companies that specialize in background checks in specific industries can be useful in the gig economy as these firms know what type of below-the-surface information to look for to unearth suspicious behavior. For example, investment firms that use a background check company that specializes in the finance industry for preinvestment checks would also find it fruitful to use that same company in their hiring processes. This is due to the fact that the company would be well-versed in discovering the nuances that are of primary importance to the industry. Additionally, some firms give businesses the power to customize their flags, enabling a white-glove service that protects employers and employees alike.

Wrapping Up the Gigging Jig

Although the screening process may be slightly different for gig workers than for full-time employees, the need to conduct due diligence is critical for both types to create healthy and meaningful working relationships.

Conducting background checks on the gig economy creates a proliferation of trust because it allows the employer to be confident that the employee/contractor will complete the job to the standards that are necessary both personally and professionally.

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