Are you a prepper? Every business owner should be. In On-Demand, you must be. We aren’t talking about preparing bug-out bags for the end of the world. A whole host of issues, big and seemingly small, can spell disaster for a business. A company embarking on a fast and furious growth program and without proper precautions can find itself in a world of hurt. Bad press is painful and litigation can be deadly.

The mobile technology behind On-Demand businesses can make a lot of things easier. But, it can’t do everything – like fulfill the functions of Human Resources. Yeah, I can see the look on your face… “Wait, Human Resources has a function? – No Way!”

Yes, in fact, Human Resources has six primary functions:

  • Recruiting and Severance
  • Workplace Safety
  • Employee Relations
  • Compensation and Benefits
  • State and Federal Legal Compliance
  • Training, Development, and Promotions
  • There’s No Substitute for Human Resources

An effective HR program implemented earlier in Uber’s growth could have pre-empted the numerous independent contractor vs. employee status lawsuits brought against it – in California, Massachusetts, Canada, and the United Kingdom say nothing of those to follow. Despite raising over $60 million, Homejoy was put out of business for this same issue. Uber and others have also been hit by numerous wrongful termination lawsuits, harassment, and discrimination suits, too.

The faster you intend to grow, the greater your need will be for an HR Program. This is true whether you intend to hire your own employees or work with independent contractors. What a proper HR Program gives you is advanced preparation to prevent, contain and respond to all manner of volatile personnel problems – that’s a long list.

But, let’s look at some statistics from XCELHR and Provident Financial Group:

  • Nearly 75% of all litigation against businesses involves employment disputes.
  • Roughly 67% employment cases are decided for the plaintiff.
  • Average trial defense cost is $45,000.
  • The median award for employment practices liability insurance cases is $218,000.

So, simply by avoiding one lawsuit, your HR Team is likely to pay for itself.

It’s generally accepted as optimal for most HR departments to have one staff member per 100 employees. Some companies have taken to having only 1 or 2 HR Specialists while merging some HR duties with managerial responsibilities. For this reason, it is better to focus on having an HR Program and not necessarily an entire department.

One vital component of such a program is an Employee Handbook to detail the companies policies, code of conduct, infractions, disciplinary processes and actions, remedies, etc. This, along with managerial training, helps to assure that everyone is fairly and consistently treated according to a due diligence process.

Background Checks and Preventing Bad Hires

In addition to the four major reasons for employee lawsuits (Harassment, Discrimination, Retaliation and Wrongful Termination) HR is also concerned with conducting background checks. Background checks are a preventative measure to screen out individuals bringing a higher risk of unacceptable behavior and related issues. Sure, “Past performance is not a predictor of future results.” While background checks do not stop tragic incidents from happening, they go a long way to reducing their frequency. In today’s world, that is a subjective issue because it can take just one high-profile news story to create insurmountable problems for a company.

Normally, background checks for taxi drivers are very strict and include:

  1. Proof of Residency
  2. Personal Hygiene
  3. Good Health
  4. Driver’s License
  5. Able to Drive 4+ Hours
  6. Criminal History
  7. Legal Age
  8. Language Proficiency
  9. Get Fingerprinted
  10. A 10 Year Printout of Driving Record
  11. Obtain an Offer From a Taxi Company
  12. Take the Class and Test

Compare that with Uber’s original and early-term driver requirements – where virtually none of these were required. As Uber began to experience problems with the behavior of some drivers, it began to tighten up by performing background checks of its own. There are numerous types of background checks, ID verification, sex offender search, state and federal criminal watch lists, etc. What you might need may run from $10 – $200. That adds some financial and administrative overhead, but it pales in comparison to the costs of a bad hire or bad contractor.

Nevertheless, in the case of accused Kalamazoo, Michigan shooter Jason Brian Dalton, he had no criminal record that could have warned the ride-hailing company he was a threat. He had over 100 rides and a 4.7 rating. And that’s the “Uber driver on a killing spree.”

Tragic as these events are, having no safeguards puts companies at risk. The impact for a company is vastly reduced when it is able to show a due diligence effort for consumer and public safety. Without a due diligence effort, your keeping the doors wide open for problems to happen.

Tech and People

That so many On-Demand businesses have faced so many lawsuits is not an issue with the On-Demand business model. It has more to do with the relative lack of experience people have in trying to rapidly create an economy of scale. Mobile apps can and do automate many work processes and business functions, but they cannot do everything. Yet. Even big, established companies like Amazon can occasionally find themselves the victim of trying to cut corners – as it has in adopting the Uber model for its Amazon Prime Now delivery drivers.

A Human Resources program is a company’s buffer working to prevent all manner of problems that can lead to civil suits, courts, bad press and massive settlements. There are occasions where service providers and employees may demand more than the company can provide – and may sue anyway, but the HR Program provides management and ownership the opportunity to resolve matters before they get out of hand. Equally important, Human Resources helps to protect service providers and employees from the potentially unlawful whims of unscrupulous executives.

There are so many seemingly hidden aspects in Human Resources that it can be easy to dismiss its importance to a rapidly growing On-Demand company. The mobile tech goes a long, long ways to making On-Demand possible, but People are still responsible for making it happen.

Infographic of Security Checks

employment background checks

Artem Petrov

CEO at Reinvently

Artem is a serial entrepreneur and the CEO at Reinvently. His background in applied mathematics, software development, and interface design spans 15 years of experience in building better businesses with mobile tech.