Freelancing is on Fire. Should Businesses Screen Independent Contractors?

About 6 min

Freelancing is on Fire. Should Businesses Screen Independent Contractors?

In 2015, Forbes made this bold prediction: Freelancing would swell to 50% of the total workforce by 2020.

It’s too soon to tell if Forbes’ prediction is true. We do know, however, even before COVID-19 decimated our nation’s workforce, 56.7 million Americans freelanced last year.

With so many people turning to freelancing to make ends meet, businesses are facing a new dilemma. 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 gig workers.

Let’s tackle some of the existing FAQs and provide some best practices.

What is a Freelancer?

First, some clarity. Freelancers are self-employed contractors who take on projects. While they may be hired to complete projects for companies or organizations, gig workers are not considered employees and do not receive the same traditional protections such as paid sick leave and unemployment insurance.

For the sake of this post, we’re using independent contractor, gig worker, and freelancer interchangeably. 

Just how prevalent is freelancing anyway?

Answer: As Forbes pointed out (even way back in 2015), freelancing is wildly popular. Freelancers Union reports gig workers make up one-third of the U.S. workforce, contributing $1 trillion annually to the economy.

Some professionals love the freedom and autonomy of working this way. Others choose to freelance out of necessity. Experts are watching the gig economy numbers closely to find out how COVID-19 is affecting the prevalence of freelancing. There are discrepancies between how the actual numbers of gig workers can be adequately measured, however, the freelance movement is an important employment category for workers and businesses in our pandemic economy because they are increasingly relying on remote, flexible, and on-demand work. 

Is screening independent contractors legal?

Answer: Yes. Employers largely have the same liability issues with these workers as with regular employees, and more employers are choosing to screen these workers to mitigate risk. In some industries and some states, employers are required to conduct background checks on all workers, regardless of employment status.

The Society for Human Resource Management (SHRM) says employers may conduct background checks on any workers, including freelancers, performing jobs on their worksites. SHRM also advises employers to refer to state laws, client relationships, and government contract requirements before conducting background checks.

Which laws govern business’ rights and freelancers’ rights regarding background checks?

Answer: The laws for screening independent contractors are the same laws pertaining to full-time and part-time hires as well as volunteers. The Fair Credit Reporting Act (FCRA) is the chief federal law and it is overseen by the Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC). The FCRA applies any time an employer obtains a pre-employment background check from a third party. 

What industries most commonly require background checks for independent contractors?

Answer: 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.

Recently, on-demand industries like ride-share services, food delivery, and home appliance delivery have come under fire for how they conduct background checks.

Some critics say that independent contractors are businesses, not individual employees, and therefore shouldn’t be screened. Is that true?

Answer: If freelancers are operating as something more than a sole proprietor, then yes, they are a business. However, the FTC says that status doesn’t negate them from a background check. The FCRA states that background checks should be conducted for “employment purposes,” and since the freelancer is being hired for “employment purposes,” a background check is warranted.

Does a business need a separate screening policy just for freelancers?

Answer: 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 are two things you need to know:

  1. A background screening program is the methods you use to collect someone’s information (such as using a third-party screening service like EBI).
  2. 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.

So, what’s the bottom line? Should businesses screen freelancers?

Answer: Whether a gig worker will be interacting with clients or handling cash or sensitive information, not knowing is not an excuse. If employers are not diligent, you could bring someone into your fold who could damage your reputation at the least and, at worst, could cause lasting harm to your employees or your customers. If you should have known something from a background check, you can be liable for negligent hiring.

How Can EBI Help?

Understanding the complexities of background screening is what we do best. Our team of compliance experts, customer care advocates, and unique services like our Trusted Advisor Program means you are never alone when you partner with EBI.

If you are considering building out your freelance network to help you recover from this pandemic economy, please reach out to one of our EBI experts. We’d love to chat with you about our background check services and our return-to-work safety solution

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