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     Independent Contractor Agreement General Information and Review Process


    An independent contractor is an individual or firm providing services free from direction and control of performance including the means and methods used.

    Independent contractors fall into two categories:
     

    1. A company or firm providing service to the public or to a broad clientele.
    2. Individuals who are clearly in business for themselves such as self-employed physicians, lawyers, photographers, artists, construction contractors, electricians, and others in an independent trade, business or profession. This includes one-time professional lecturers and short-term professional consultants.


    Otherwise self-employed individuals or those employed by other organizations who do part-time work not connected with their other employment are usually considered employees of the Research Foundation.

    When engaging personnel services for work on a project, it is the responsibility of the Principal Investigator/Project Director to make an initial determination as to whether to classify an individual as an employee or an independent contractor.

    The IRS has issued general guidelines rather than more specific regulations on the employee/independent contractor distinction. Therefore, each request for an ICA must be evaluated very carefully. The legal staff looks for a preponderance of factors towards one classification or another. There is no single criterion which determines classification one way or another. Please be aware, however, that when the proposed consultant is an individual with a social security number (for tax identification purposes), the IRS presumes the person is an employee and this presumption is a heavy burden to overcome. Extra caution will be taken before issuing an ICA to individuals not ordinarily in the business of consulting or to past or present CUNY employees; you may be asked to provide further information.

    IRS guidelines are based on common-law rules, rather than statute, and are thus open to interpretation. The general rule is that if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the results, s/he is an independent contractor, rather than an employee.

     

     General Factors in Determining the Status of a Service Provider:

    The Research Foundation's Office of Legal Affairs uses the criteria below in trying to decide whether an individual is an independent contractor or an employee,

    Does Scope of Work Pass the Control Test?

    Most of the IRS's criteria for determining the status of a service provider hinge on the idea of the amount of control an employer may exercise over the individual. Please keep in mind that for the IRS, it doesn't matter whether or not this control is actually exercised, just that a relationship of control exists. In each case, it is very important to consider all the facts - no single fact provides the answer.

    THE 20-FACTOR TEST

    The IRS developed the 20-Factor test to determine if a business controls and directs a worker, or has a right to do so. The factors (questions), applied to each individual circumstance under which services are to be performed, determine the individual's classification. The questions must be objectively and consistently applied in order to determine the individual's correct status. If the predominance of answers to the 20 questions is "yes", the individual is most likely an employee. If the predominance of answers is "no", the individual is most likely an independent contractor.

     
    The 20 questions are as follows:
     

    1. Is the individual directed by someone at the College as to when, where and how the work is to be done?
    2. Is the College providing detailed instructions or training to enable the individual to perform the work in a particular way or manner?
    3. Can the individual perform the work without any risk of direct economic loss to himself/herself?
    4. Are the services provided by the individual an integral part of College's operations or the prime project, like those already performed by others within established job classifications (e.g. clerical work, teaching or research)?
    5. Must the services be performed specifically by the individual (rather than by someone else employed by the individual)?
    6. Will the College hire, supervise or pay others to help the individual on the job?
    7. Is there a continuing work relationship between the individual and the College?
    8. Is the work schedule set by someone at the College?
    9. Is the individual required to devote his/her full time effort to the College?
    10. Is the work required to be performed at the College, or in specific places designated by the College?
    11. Is the sequence of work set by someone at the College?
    12. Are regular oral or written reports required to be submitted to the College by the individual?
    13. Is the method of payment based on hourly, weekly or monthly fees (as opposed to commission or by the project/job)?
    14. Are business and/or travel expenses reimbursed?
    15. Does College furnish the tools, equipment and materials used by the individual?
    16. Can the individual perform the work without making or having made any investment in equipment or facilities?
    17. Does the individual perform services exclusively for the College rather than working for a number of companies at the same time?
    18. Does the individual not make his/her services regularly available to the general public or businesses other than the College?
    19. Is the individual subject to dismissal for reasons other than nonperformance of contract specifications?
    20. Can the individual and his/her working relationship with the College at any time without liability for failure to complete the job?

    Additional Factors in Determining the Status of a Service Provider:

     

       

     List of Clients and Years Consulting 

    • The more clients and the more years consulting, the easier it is to classify an individual as an independent contractor. If the consultant you wish to engage is incorporated, or works for a consulting firm through whom s/he can be paid, an ICA can be issued almost immediately. If the individual has little or no previous consulting experience, or has regular, full time employment, the Legal Department will usually want to know why this individual is uniquely qualified to perform the services in question.


    Prior ICAs through the RF 

    • Just because an individual has previously been issued an RF ICA does not mean they will automatically be issued one again. The Legal Department may classify such individuals as an employee if their ICA history with the RF indicates a long term involvement or continuous employment, especially if the ICAs have been issued for the same project or the individual lists no other clients.


    Rate/Amount of Pay/Timeframe of Performance 

    • Generally, shorter timeframes and/or lower rate of pay are easier to classify as independent contractors.


    Previous or Current CUNY Employment 

    • Hiring an individual as a consultant who has an employment history with the institution can create potential liabilities, even though there can be legitimate reasons for doing so. Such individuals ought to be performing duties that are substantially different from those they performed as an employee. As a rule, the more time that has elapsed since CUNY employment, the easier it is to classify such individuals as contractors.
    •  

       The Legal Department will also consider any other facts which may indicate the individual is in the general business of consulting.

      The Internal Revenue Service has issued the following publications which provide additional information on independent contractor status.
       


    Final decisions regarding these classifications are the responsibility of the RF's Office of Legal Affairs.

    If the RF is found to have misclassified an individual, potential liabilities include:

    • severe IRS penalties
    • assessment of back Social Security Taxes and interest
    • unemployment claims
    • Workers' Compensation claims
    • the vicarious liability of an employer for an employee's actions


    Call Legal Affairs at (212) 417-8361 with any questions you may have regarding the classification of an independent contractor.

    Disclaimer: All information provided on this web site and the attached pages is intended for educational use only and should not be regarded or taken as legal advice that would be provided by an attorney to a client.

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