It is the College's policy that individuals will be considered independent contractors only if they meet all of the following conditions:
Although most workers can be properly classified based on the above prerequisites, there are some situations in which all of these conditions are not met, or the correct classification is not readily apparent. In these cases it will be necessary to further review the nature of the arrangement. This review involves evaluating many different aspects of both the worker and the work to be performed, which when taken as a whole, will determine the correct classification of the worker [see Determining Employer and Employee Relationship (pdf)].
The penalties for incorrectly classifying employees as independent contractors are significant. If a worker paid as independent contractor is reclassified by the IRS as an employee, the College will be liable for the amount of the federal income taxes it failed to withhold, together with both the employer's and employee's share of FICA taxes associated with that employee's compensation.
Departments are responsible for making an initial assessment of the employment status of individuals they hire; departments are encouraged to contact Arlene Marsh in Procurement Services with specific questions prior to finalizing arrangements with the individual. If an employer/employee relationship is found to exist between the worker and the College, the worker must be considered an employee, and payments for services are handled through the Payroll system with applicable taxes withheld. If the individual is an independent contractor, payments for services are processed on a Purchase Requisition with a completed Independent Contractor Statement & Disclosure Form.
The hiring of an independent contractor or consultant should be based upon a selection process which attempts to secure the most qualified individual for the assignment. Compensation should be appropriate for the type of advice or service provided and should reflect the skills and qualifications of the individual selected to perform the service.
In cases where workers do not meet the independent contractor conditions established by the IRS, an employee/employer relationship is presumed to exist, and these individuals must be paid for their services through the College's payroll system. If it is determined that an individual is correctly classified as a non-employee, then the person may be paid through Accounts Payable, provided all of the other documentation requirements are met.
The hiring of outside legal counsel for any College assignment, e.g., professional advice, lobbying, court appearances, litigation, etc., must be approved in advance by the Office of General Counsel.
Full-time, salaried employees of the College who may be asked to serve as consultants for other College departments are not entitled to receive additional compensation for performing such services when those extra duties fall within their area of professional expertise. This is true even when the work is conducted during an employee's "own time" or outside of normal business hours. Such assignments are considered part of the job for which the employee is already compensated.
College employees who incorporate, and who in turn provide services to the College that are related to their primary job assignment, will not be classified as independent contractors solely because they have incorporated.
In the case of contractors who perform services funded from a sponsored project account, departments must also comply with any limitations imposed by the sponsoring agency on either the rate that may be paid to consultants or the amount of travel and related expense reimbursement. It is advisable to discuss each situation with the Office of Sponsored Projects and to carefully review the sponsor's program literature when preparing a grant proposal or hiring a contractor or consultant.
Accounts Payable is primarily responsible for payments to non-employees; Human Resources and the Office of Sponsored Projects may play an important role in the process.
Last Updated: 10/1/14