Contractor Background Checks: A Complete Guide

According to a 2023 report from MBO Partners, the number of full-time independent contractors in the U.S. grew a meteoric 90% from 2020 to 2023. What’s more, research from Statista projects that 86.5 million Americans will be independent contractors by 2027. That amounts to more than half of the U.S.’s total workforce.

This rise in the gig economy offers businesses and workers mutually beneficial opportunities—but given the wide range of work functions fulfilled by contractors, it also presents new challenges in business security and vendor risk management. As independent contractors become an integral part of businesses across all industries, the need for thorough vetting is more important than ever.

Below, we explain why vetting top-tier talent can help safeguard your enterprise from potential risks. Keep reading to learn what contractor background checks include and how they protect your business.

What is an Independent Contractor?

Vendors, contractors, freelancers—given the abundance of terms used to describe non-employee service providers, it’s first worth defining what an independent contractor is.

According to the IRS, an independent contractor is a self-employed individual who provides specialized services to a company under contract. A vendor, on the other hand, typically sells goods or products, with less focus on customization or ongoing labor. Still, vendor background checks remain essential to ensure reliability and mitigate risks.

Also known as freelancers or freelance workers, contractors can fulfill a variety of roles, including IT support, marketing, design, and bookkeeping. Clients hire them for their expertise and flexibility, often for specific tasks or short-term assignments. Unlike employees, independent contractors do not receive employee benefits or have taxes withheld from their payments. This offers businesses the opportunity to leverage skilled talent as needed, but conversely, also introduces potential risks and liabilities based on their role, data access, and scope of work.

Can I Run a Background Check on an Independent Contractor?

You are absolutely allowed to run background checks on independent contractors—in fact, doing so is recommended. Background checks establish a consistent standard among all workers and help ensure the safety and security of your company. By thoroughly vetting contractors, you mitigate potential risks and uphold the integrity of your business.

Which check fits depends on the decision you’re making. If you’re contracting with a business, a business background check on the company and its principals is the right tool. If the screening feeds what is effectively an employment decision about an individual, the Fair Credit Reporting Act (FCRA) can apply, and that check belongs with an FCRA-compliant screening provider. Business Screen handles the first kind: due diligence on contracting companies and the people who own them. Our FCRA vs. non-FCRA guide explains where the line falls.

The Importance of Independent Contractor Background Checks

Just like with employees or business partners, contractors can impact your company reputation, finances, and legal standing.

No matter your industry, checks on independent contractors help you manage risk. They verify a contractor’s credentials and reliability, and surface the financial, legal, and reputational issues that can follow a contractor into your business.

Ultimately, background checks provide businesses with peace of mind by verifying the credibility and reliability of contractors before they enter into working relationships.

The Key Elements of a Contractor Background Check

A thorough contractor background check should include five crucial elements:

• Identity verification: This is the foundational step of any background check as it helps confirm the contractor’s legitimacy. It ensures that the contractor is who they claim to be by verifying personal information such as full name, date of birth, and Social Security number. Identity verification can also involve checking government-issued identification, work permits, and tax identification numbers.
• Civil litigation history: A history of frequent litigation—for example, lawsuits, breach of contract cases, or negligence claims filed against a contractor—might reveal a pattern of problematic behavior or unreliability. Examining civil case records for any unresolved or past legal battles can provide insights into how the contractor handles business disputes and their overall trustworthiness.
• Financial troubles: A contractor struggling with debt or involved in financial disputes may be at higher risk of cutting corners or delivering subpar work. For that reason, past bankruptcies, liens, or judgments can provide a clearer picture of whether they have a stable business that can handle their given responsibilities. Additionally, business credit scores can serve as another indicator of financial viability.
• Negative reputation issues: A history of negative customer feedback or media reports could signal potential risks in a contractor. Searching for news articles, reviews, and feedback from past clients on social media and other online platforms can help uncover patterns of poor performance, unprofessional behavior, or ethical concerns.
• Criminal history: A comprehensive criminal history check can identify any past criminal offenses that could pose risks to your business. This includes searching for records of felonies, misdemeanors, or other criminal activities. The nature and severity of the offenses should be taken into account based on the type of work the contractor will perform. For example, a contractor with a history of fraud or theft may not be suitable for roles involving sensitive information or access to valuable assets.

How to Run a Background Check on an Independent Contractor

When preparing to run a contractor background check, it’s important to gather the right information. Business background checks call for the company’s legal name and address while for individuals, it’s necessary to get their legal name, location, date of birth, last four digits of their Social Security number—and possibly their address and cell phone number.

In most cases, however, best practice advises collecting authorization from independent contractors, which not only streamlines the process but also promotes equity and transparency.

To help guide your background check process, use our checklist below:

1. Define the scope. Identify what information you need, such as civil litigation, liens and judgments, licensing, and criminal records.
2. Collect information. Gather personal identifiable information (PII) from contractors, such as their date of birth, Social Security number, and any relevant past addresses.
3. Choose a background check provider. Select a reputable and accredited background check service like Business Screen.
4. Submit the request. Send the collected information to your chosen background check provider.
5. Review the results. Carefully analyze the background check report for any discrepancies or red flags. Based on the findings, you can decide if the contractor meets your trust and reliability standards.

A standardized process saves time and keeps every contractor evaluation consistent and fair.

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Get a Contractor Background Check with Business Screen

Contractor background checks are a fundamental practice for maintaining a secure and trustworthy business environment. By thoroughly vetting potential contractors, you can mitigate risks, verify compliance, and protect your company's reputation.

To streamline your background check process and ensure comprehensive results, consider working with Business Screen. Contact us today to learn more about our background check services, use cases, and other resources.