Conducting background checks on full-time and part-time employees is standard hiring procedure for millions of employers, but questions still linger over whether businesses can screen independent contractors, freelancers and vendors.
Let’s tackle some of the existing FAQs about independent contractor background checks and clear up any confusion. For the sake of this article we use independent contractor/freelancer/vendor interchangeably.
Q: Just how prevalent is freelancing anyway?
A: Depends on who you ask. Roughly 54 million Americans are now doing freelance work, reports this study. Sixty percent made the move by choice, marking growth in this category for consecutive years. The Bureau of Labor Statistics, however, challenges those figures with reports of just 14.8 million self-employed workers in 2014 for a mere 10% of the workforce.
Whatever figure you believe, the freelance movement is an important employment category for workers and businesses in our increasingly flexible and on-demand economy. Forbes says freelancing is expected to swell to 50% by 2020.
Q: Is screening independent contractors legal?
A: Yes. In some industries and some states, employers are required to conduct background checks on all workers, regardless of your status. Let’s put it this way – the Society for Human Resource Management (SHRM) says employers are NOT stopped from conducting background checks on any persons, including freelancers, performing work on their worksites.
Q: Which laws govern business’ rights and freelancers’ rights in regards to conducting background checks?
A: The laws for screening independent contractors, vendors and freelancers are the same for laws pertaining to full-time and part-time hires as well as volunteers. The Fair Credit Reporting Act is the chief federal law and it is overseen by the Equal Employment Opportunity Commission and the Federal Trade Commission. The SHRM also advises referring to state laws, client relationships and government contract requirements before conducting background checks.
Q: What are the industries that most commonly require background checks for independent contractors?
A: The big players are government, finance, security, healthcare and those industries serving vulnerable populations like children, the elderly and people who have disabilities. Many employers within these industries are required by law to screen everyone before they can come on board.
Q: Some critics say that independent contractors are businesses, not individual employees, and therefore shouldn’t be screened. What do you say to that?
A: If they are operating as something more than a sole proprietor, then yes, independent contractors are a business. That status, however, shouldn’t negate them from a background check says the FTC. The FCRA states that background checks should be conducted for “employment purposes,” and since the business (ie. freelancer) is being hired for “employment purposes,” a background check is warranted.
Q: Does a business need a separate screening policy just for freelancers?
A: No. In fact, you should treat everyone equally. This will help you stay compliant with applicable laws and avoid potential discrimination complaints. But developing a clear, concise and cost-effective background check system takes work. Here’s two things you need to know:
A background screening program is the methods you use to collect someone’s information (such as using a third-party screening service like Active Screening).
A background screening policy provides a blanket set of instructions, guidance and rules that everyone in your company must abide by to instill consistency and efficiency into the hiring process.
Read ‘Four Steps to Define Your Screening Services Policy’ for step-by-step advice to get you started.
Have more questions? Our Active Screening team is always available for answers.