Many employers hire freelance workers to save money, to avoid the need to pay benefits, or when they need more specialized workers for a specific project or service. Independent contractors allow for staffing flexibility. They can also reduce your exposure to employee lawsuits and allow greater leeway in hiring and letting go of workers.

You can hire an independent contractor for a specific task or project while avoiding the expense and potential legal issues that can accompany employee firings and layoffs. Independent contractors can sue only if you violate the terms of your contract with them. You must treat them like independent contractors and not employees or you risk exposure to the law that says you should be paying payroll taxes, workers' compensation insurance premiums, etc.

Conduct Background Checks

But what happens if you do have an issue when using an independent contractor? Or what if you need to fire an independent contractor? In an effort to reduce risks and liabilities it’s a good practice to conduct background checks on all workers, regardless of whether they are employees, temporary employees, consultants, independent contractors, or subcontractors.

Always rely on your internal policies based on background checking laws, client relationships, government contract requirements, the employers’ industries, the U.S. Equal Employment Opportunity Commission (EEOC), the Fair Credit Reporting Act (FCRA) and, for some service employers, the population with which they work and interact. Some employers in specific industries - such as those related to national security, employers with government contracts, positions requiring security clearance and other security sensitive positions - are generally required to perform background checks on all their workers. This usually includes independent contractors and other contingent workers.

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The FCRA, which governs the use of background checks, lists “employment purposes” as an appropriate use for obtaining a consumer report on an individual. The act also defines a “consumer” as an individual and “employment purposes” as “used in connection with a consumer report means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.” Since independent contractors are not included when defining the use for “employment purposes” under the act, the Federal Trade Commission (FTC), the agency responsible for the enforcement and interpretation of the FCRA, has issued an opinion letter stating that the term “employment purposes” should include independent contractors.

Consistency is Key

The EEOC, which also provides guidance for employers on the use of background checks, does not prohibit employers from applying their background checking practices to contingent workers, including independent contractors. The EEOC requires that when making hiring decisions, employers demonstrate that their employment decisions applied to the use of background checks are job-related for the position in question and consistent with employers’ business necessity.

Employers who choose to conduct background checks should apply their policies the same to their employees, candidates for employment, independent contractors, consultants and other contingent workers to prevent potential claims of discrimination and to ensure compliance with all federal, state and local laws.

Your right to fire an independent contractor will depend on the written agreement you have with them. You do not have an unrestricted right to fire them as your rights are determined by the terms of your contract.  If you fire them in violation of the agreement, you could be liable for breach of contract.