According to a 2023 study by the National Bureau of Economic Research, nearly 15% of the entire United States workforce now comprises independent contractors. That percentage represents millions of Americans who aren't engaged in the traditional hiring and employment process. As the gig economy continues to mature and grow, more jobs are shifting away from typical part-time and full-time employment arrangements. How does this change influence and impact the need for employers to know how to use a contractor background check?
As economic conditions change, more workers are increasingly open to accepting such independent and freelance positions. The self-employed aren't all people running their own businesses or acting as entrepreneurs—on the contrary. Many offer their services to businesses. Some, such as DoorDash, InstaCart, and Uber, can blur the lines between contracting and employment. Other arrangements are more typical, such as when a business contracts with an independent individual for a service the business needs.
The need for careful due diligence doesn't vanish simply because your business is not hiring an individual directly but contracting them. In all these scenarios, contractor screening remains critically important for safeguarding your business, protecting its asset, and potentially protecting the public.
What do employers need to know as they seek to work with the growing segment of independent contractors? Join us for an in-depth look at the facts about background checks for independent contractors.
Can I Run Background Checks on Independent Contractors?
Not every business owner or hiring manager has experience beyond the traditional workflows. Knowing what to expect in a changing economy is the first step toward creating innovative, practical policies. Employers that structure their hiring and background check work around traditional employment arrangements may have some critical questions as they explore this opportunity.
For example: are there different rules and regulations for running a background check on an independent contractor? Are you, as an employer, even allowed to require a contractor to submit to your background check policy in the first place? It's important to know, but luckily, the answer isn't complicated. Simply put, you can use a contractor background check, provided you do so per the law.
An independent contractor background check typically does not need to be much different in practice than a background screening for full-time or part-time employees. All the same rules and regulations for background checks still apply: employers should continue to observe all statutes set by the Fair Credit Reporting Act (FCRA) and guidance from the Equal Employment Opportunity Commission.
Just as you would for a regular job applicant, you must provide a standalone disclosure to the individual of your intent to use a background check. You must also gather their signed consent on a separate form and follow the necessary adverse action rules if you decide to decline to work with the individual. Independent contractors are not exempt from the protections of “ban the box,” Fair Chance, or Clean Slate laws.
Employers may benefit from treating prospective independent contractors just as they treat potential new employees for streamlined hiring processes and less confusion.
The Importance of Running a Background Check
Why is it critical to use contractor screening? As a regular employee, you must hire a safe, reliable individual. It is important to remember that you may be responsible for the actions a contractor undertakes while working for you.
The list of reasons for making such a consideration is lengthy. First, the individual you plan to hire will be the face of and representative of your business. As such, you must know that this candidate is qualified to perform the job. Likewise, you should seek assurances that they do not pose an immediate risk to their colleagues, your customers, your business, or the public.
The information you discover during the screening process can prove fundamental to your final decision. Warning signs may indicate that a candidate lied about their qualifications, has a violent history or has embezzlement convictions that make them a potential threat to your company. These are all examples of background check findings that could indicate hiring the contractor carries with it a steep risk. Employers who find this information through a background screening may choose not to hire that candidate. Doing so could cause undue expenses, legal liability or otherwise destructive errors.
Just as you would use a background check for a regular employee to uncover this information, so should you use them for contractors. Why?
Increasingly, independent contractors are taking on the roles that full-time employees used to fill—even in the government. It's hard to think of an industry that these waves of disruption haven't touched. Think about it: contractors are now a key part of many industries, from transportation (companies such as Uber or Lyft) to delivery (like DoorDash) to creative services (such as Fiverr). As more companies embrace these quick solutions, it can be tempting to skip vetting and due diligence. Those actions take time—and aren't contractors supposed to provide your business with the agility to respond to new demands?
Think about the role and responsibilities involved. A contractor may represent your business out in the world, be in direct contact with your customers, or even have access to sensitive trade secrets as part of their work. The temporary nature of the employment arrangement doesn't diminish the risks inherent in hiring someone. Hiring a contractor is often a risk in the same way that hiring a full-time employee would be. A thorough independent contractor background check can significantly reduce this risk's magnitude and deliver critical peace of mind.
Let's closely explore some of the most important reasons to conduct background checks on contractors.
1. Protect Your Brand Reputation
Just as with a regular employee, a contractor representing your business could damage your reputation if they aren't capable of doing the job—or if they create safety risks. A failure to conduct background checks on independent contractors could result in many problems. For example, if the candidate isn't qualified for the position, they might produce consistently poor-quality work. If a contractor assaults a customer or causes a major incident, it could bring unnecessary negative press against your brand.
Many aspects or events could damage your brand identity and reputation. Don't let the employees and contractors you choose be one of them.
2. Ensure Consistency
Businesses should have standards for their workforce that they seek to maintain. Such standards contribute to better consistency regarding the skill and capabilities of those you hire. The result is a workforce of employees and contractors whom you know are the best fit possible for the position.
Running the same background checks on contractors as you do on employees also ensures consistency in the hiring protocol. Such a common approach is vital as more segments of the workforce pivot to the gig economy. Applying different screening program rules to similar categories of employees can expose you to legal liabilities and claims of discrimination.
3. Maintain Compliance With Legal Requirements
Some industries have legal requirements that mandate background checks for specific jobs. These laws can extend to affect some contracting roles as well. Employers should understand their compliance requirements for vetting candidates and note whether they extend to contractor roles.
Can Independent Contractors Get Drug Tested?
Since independent contractors are more likely to work remotely or telecommute, drug screening is more logistically tricky than it would be for employees who come to work at a central location every day. However, no law prohibits employers from requiring drug testing for contractors. At backgroundchecks.com, we offer a flexible drug testing solution that employers can use for in-office or remote workers.
How to Run a Background Check on an Independent Contractor
There is no fundamental difference between background checks for independent contractors and employees. The same strategies your business uses for vetting full-time or part-time employees will likely be just as effective for contractor background checks. Likewise, you will want to use the same types of vetting products. Criminal background checks, reference checking, and license or educational verification are all useful. Simply follow the FCRA guidelines, obtain consent, and use the same process you already have.
Note that you can utilize all the services we offer at backgroundchecks.com for employment screening on potential contractors.
What Are the Costs of Running a Background Check on a Contractor?
Budgeting for vetting is imperative. The costs of running a background screening will vary depending on the specific services you require. This is true no matter the category of applicant or employee you intend to vet; there is no particular price difference between employee or contractor checks.
At backgroundchecks.com, we make it simple to customize your approach. We offer a la carte screening services that range from county criminal screenings to verification checks for resume information, such as education and work history. As your background check company, we can offer bundled packages to customize and streamline your approach.
We always aim to include pricing transparency with each check that we offer but note that some checks may cost more than initially quoted under exceptional circumstances. For instance, additional fees may be incurred if we need to send a court runner to your county of choice for criminal records. We will always be upfront about the total costs of a contractor background check.
Frequently Asked Questions
How do I do a background check on a contractor?
If you follow the requirements of the FCRA—including disclosure and consent—you can vet a contractor just as you would an employee. After meeting FCRA requirements, you will need to obtain information such as the applicant's name, date of birth, and in some cases, their Social Security number. You can then use this information to request screening reports the same way as always.
Can you do a background check on an independent contractor?
Yes: no law restricts background checks on contractors. The FCRA, Equal Employment Opportunity Commission guidance, and local or state restrictions such as ban the box are all factors employers must consider for every hire. Focus on complying with all laws relevant to background checks in your jurisdiction, whether you’re screening prospective employees or contingent workers.
What disqualifies you from a job in a background check?
What is disqualifying depends on the employer and the position. Serious felonies (such as violent crimes or sex offenses) are more likely to be red flags to every employer. More minor crimes (such as petty theft or minor drug charges) may not be barriers to employment.
Other factors may be disqualifiers for some positions but not for others. For instance, a suspended driver’s license will likely be a deal-breaker for a trucking job, but it won’t be as severe or relevant for an office position.
Do construction companies do background checks?
Construction sites are dangerous if workers are not qualified or impaired on the worksite. Construction companies are an example of employers that hire many contingent workers and consistently require contractor background checks. Construction companies are an example of employers that employ many contingent workers and consistently require contractor background checks. Construction sites are dangerous if workers are not qualified or impaired while on the job. Criminal history checks, verification searches, and drug tests are all likely to be part of a construction contractor background check.
About Michael Klazema The author
Michael Klazema is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments