Background Checks in a New Economic Paradigm
Two economic trends are exploding as the end of the decade nears — the legal cannabis industry and the contingent (i.e. ‘gig’) labor economy. Both require an examination of how we vet a non-traditional workforce for safety and quality.
Explosive Growth, New Challenges:
According to the ArcView Group, an industry-leading research and investment firm, by 2020, legal cannabis will be a $20+ billion industry in the US. Also by 2020, 43% of American workers will be active participants in the on-demand economy, according to an Intuit forecast. With 92% of Millennials wanting to work remotely, and 87% wanting to choose their hours, this is a trend that will only increase as this new generation takes over the workforce.
However, even with the massive growth of these trends, hiring for both cannabis and the gig economy is a major challenge.
Most gig-economy jobs are service oriented, and those services are often very personal: customers give over control of a major asset (i.e., a home on Airbnb) or even their lives in a sense (Uber or Lyft), to a complete stranger. The negative consequences from bad actors or poor labor can be fatal. Therefore, virtually all contingent labor providers and platforms have mandated the use of pre-employment screenings/background checks.
Cannabis has this same issue, as one of its most critical jobs, trimming, is primarily composed of contingent workers. On top of the safety concerns of dealing with strangers, discussed above, cannabis has another major issue — legality. The varying degrees of legality, even within individual state markets, make people extremely hesitant to share the personal information necessary to run a proper check.
Pre-Employment Screening Basics:
In a traditional pre-employment screening, a specific employer requests to run a background check on a specific applicant. This applicant then authorizes the check to a third party who runs the screening and sends it directly to the employer. If the employer finds disqualifying information in the check that is not related to one of the eight categories protected by the EEOC (Equal Employment Opportunity Commission, which protects race, national origin, color, sex, religion, disability, genetic information, and age), they can make a decision not to hire, as long as they clearly indicate to the candidate why. Unless requested, the applicant doesn’t even see the raw results of the check.
In addition to the EEOC, the rules around how to conduct background checks are governed by the FTC (Federal Trade Commission) and the FCRA (Fair Credit Reporting Act). All of these rules are designed to prevent employers from using someone’s background to discriminate against them. In fact, because of the potential for discrimination claims, employers generally run checks only after they have already made a hiring offer based on all other employment factors — it is easier to reject a candidate before a background check, as the communication requirements around the cause for rejection is less stringent.
Changing perceptions:
“It used to be that gig workers were not as rigorously screened as permanent workers, due to the perception that gig workers being temporary in nature did not need the same level of scrutiny. This has changed,” says Adam Almeida, President and CEO of a background check service provider. As the gig economy grows, these background checks will become increasingly more frequent. It’s already the standard for the largest gig economy players — the Taskrabbits, Ubers, and Airbnbs of the world — so the ability to meet this demand with affordable and fast checks is paramount to these businesses’ continued growth.
With the legal concerns surrounding the cannabis industry, you may wonder how background checks even fit in? In some cases, they’re mandatory. States such as Colorado and Oregon implement highly regulated adult use markets and require all labor in this market to be licensed — even short-term cultivation help. Critical to this licensing is identity verification and a comprehensive background check. In these particular instances, a criminal background, even for non-violent distribution of cannabis, is an automatic disqualifier. While this is certainly a public policy issue of major contention, in other, less restrictive cannabis labor markets, a background check with this type of violation demonstrates valued experience.
These requirements are particularly challenging when hiring trimming labor, which may only be needed a few weeks a year, sometimes spread out across 4 or 5 harvests. There are also large outdoor grows with one fall harvest, where virtually the entire workforce will be temporary laborers from all over the US and the world.
Flipping the model:
We at Field have thought a lot about best practices around identity verification and background checks, especially since many of the folks we’ve talked to equate a background check with a violation of their privacy — and it’s not like that at all. Virtually all employers would like the peace of mind of knowing that the individuals they hire have had their identities confirmed and backgrounds checked. And since these employers (and their hires) mainly care that the individual has been checked period, they don’t necessarily need to see the details in the reports themselves, or any personally identifying information for that matter. All of this is contingent upon them trusting the intermediary source validating the status of the check of course.
As such, we feel the optimal solution is a “trust network” — a system that vets and confirms an individual’s identity, background check, reputational feedback, and industry credentials. However, the system only indicates these things exist, and their status, but does not reveal the raw personal information itself. In fact, it securely stores this personal data in a sort of “escrow,” to ensure transaction compliance.
On top of the system being able to represent the existence of certain data, and holding it in escrow as opposed to revealing it, the other key to this model are users being able to own, control and share their own background checks themselves.
1. Secure data/personal information escrow
Escrow is when a third party holds something(s) of value between two other parties to ensure both sides uphold their ends of a transaction. Once both sides meet their deal commitments, the escrow agent releases or returns this value.
While we typically think of the value being held in escrow as money or ownership/control of something, it can also be knowledge or data. And in this particular case, it can be as nuanced as simply the value of knowing certain information exists and has been confirmed.
In the cannabis labor scenario, the transaction consists of one party providing quality labor, and the other side providing the job (and in turn money). However, rather than say, the money being held in escrow, what is held is the personal information about the parties. Once the job is complete without issue, the system effectively ‘releases back’ the personal information to its respective owners.
Each side has confidence that if a substantial harm occurs, the information held in escrow will be released to the other party, or in some cases, the authorities. Important to note, there must be clear escalation standards about what exactly triggers the escrow agent to release this data and to whom. Additionally, the system has to be set up such that authorities cannot wantonly request user information, or better yet, it needs to be encrypted to the point it’s essentially useless if they get their hands on it.
2. Workers owning their checks
Rather than prospective employers running background checks on job applicants, workers should have access to their own verified and secure background check, which they, in turn, can share with any employer (within a certain timeframe of running it of course) with the confidence it will be accepted as if the employer ran it themselves.
In our cannabis example, an employer who finds a worker can request their background check status. The applicant can then simply release to them the fact their identity has been confirmed, and that they have a background check. If the employer wants to see more detail, the two parties can negotiate what exactly is shared, and the applicant can release components in piecemeal if desired.
It appears a bit tricky on the surface with the consent and reporting requirements of the EEOC, FTC, and FCRA. However, as long as the terms of service of such a system are airtight, and the hiring decision is made considering the face value of a background check (clear vs. flagged) and not the details of the check itself, we see no liability issues or additional reporting requirements in the case the applicant is not hired.
Have thoughts or experiences with background checks in the gig or cannabis industries? We would love to hear them!
