Independent Contractor Policy

AUDIENCE

All departments that engage service providers to provide work on the University’s behalf.

PURPOSE STATEMENT

The purpose of this Policy is to comply with Internal Revenue Service regulations regarding the appropriate classification of independent contractors.

DEFINITIONS

Employee: a worker is an employee if the University has the right to direct and control the worker, not only as to the result to be accomplished, but also as to the details as to how the work is to be accomplished.

Independent Contractor or Consultant: an individual or firm engaged in an established business, trade or profession who provides services to the University and the fees are reported on the IRS Form 1099-MISC.  An Independent Contractor is not an employee of the University; an Independent Contractor is a worker who: (a) is engaged in an independently established profession or business; (b) provides a service outside of the University’s usual course of business; and (c) is free from the University’s control or direction when providing services.  The criteria for determining whether or not a worker is an Independent Contractor is discussed in the procedures section below.

THE POLICY

The University is committed to hiring individuals who perform services for the University in accordance with applicable law, including laws and regulations pertaining to the proper classification of individuals as independent contractors or employees.  It is the policy of Thomas More University to have all proposed independent contractor service agreements with individuals reviewed for proper classification prior to engaging the individual.  Prior to committing to pay an individual for services, the University will determine whether the individual will be classified as an employee or independent contractor in accordance with the procedures described below.

RELATED POLICIES AND APPLICABLE LEGAL OR ACCREDITATION STANDARDS

Employee Classifications Policy

PROCEDURES

Proper determination of whether a service provider is an employee of the University or an independent contractor ensures that the University complies with the requirements of The Fair Labor Standards Act, Immigration and Naturalization Service regulations and statutes regarding income tax withholding, unemployment insurance taxes, and Social Security and Medicare taxes.  Improper classification may result in penalties to the University.

I. Process for Approval of Independent Contractor Status

An Independent Contractor Request Form is to be completed by the department desiring to engage the service provider and submitted to the Business Office.  Approval of independent contractor status from the Business Office must be received before services can be provided to the University.  In determining Independent Contractor status, the Business Office will utilize the following criteria:

1. Renders a service to the University for a specified payment amount for a specified result;
2. Is engaged in an independently established profession or business (namely, offers similar services to the general public on a consistent basis);
3. Provides a service outside of the University’s usual course of business;
4. Is not currently paid through University payroll and has not been paid through payroll within the current calendar year;
5. Provides services through a written contract or agreement; and
6. Is free from University control or direction when providing services.

II. Risk Management Insurance

An Independent Contractor providing services to the University is required to provide Proof of Liability Insurance to the Business Office before beginning to provide services and annually as services continue.

III. Present and Former University Employees

In general, services provided by employees of the University must be paid through the Business Office.  Human Resources, in collaboration with the Business Office, will make the final determination of Independent Contractor status for a former University employee.

IV. Citizens of Other Countries

In order to perform services at the University, foreign nationals must have an immigration status that permits them to receive independent contractor payments.  Foreign nationals will not be allowed to perform services or receive payment without having an appropriate immigration status and being able to provide the University with the required documentation.  Listed below are details regarding the type of documentation required to be able to perform services at the University for the most frequently encountered statuses.

A. Foreign Nationals Currently in the United States:

• B-1/B-2 (Visitor for Business) or WB/WT Status (Visa Waiver for Business/Tourist): Foreign Nationals with B-1/B-2 or WB/WT Status will need to possess an I-94.  These individuals will only be permitted to receive honoraria and associated incidental expenses for “usual academic activity” lasting no longer than nine (9) days at a single academic institution.  Individuals cannot accept honoraria from more than five institutions within a six (6) month period.
• J-1 Research Scholar Status: Foreign nationals with J-1 status will need to possess a (i) I-94, (ii) DS-2019 form, and (iii) a letter from their Responsible Officer (RO) or Designated School Official (DSO) authorizing the employment at the University as incidental to their program objectives. The letter should specify the dates and activities that the individual will be engaging in while at the University and also include information regarding any reimbursement for travel expenses.
• H-1B Status, TN, E-3, and O-1 Status: These individuals will need to possess a (i) I-94 and (ii) I-797 approval notice. Please note that because H-1B, TN, and O-1 status are employer specific, such individuals may only be reimbursed for travel and reasonable, incidental living expenses for activities performed at the University.  Further, these activities must be incidental to the individual’s primary employment.  A speaker’s fee or honorarium from the University is not permitted.  Individuals in O-1 status must identify the University on their itinerary or they cannot be paid.

B. Foreign Nationals Currently Outside of the United States

The B-1/B-2 (Visitor for Business) or WB/ WT (Visa Waiver for Business/Tourist) is a visitor to the United States for business or leisure purposes.  Individuals in B-1/B-2 or WB/WT status may engage in “usual academic activities” for no more than 9 days at a single academic institution.  Additionally, they cannot accept honoraria from more than five institutions or organizations within a six-month period.  To obtain B-1/B-2 or WB/WT status, the individual will need to request an offer letter from the inviting department describing the purpose and length of the visit, as well as the amount to be paid as honoraria and for expenses.

Individuals from any country not eligible for the WB/WT program or those from a visa waiver eligible country who wish to remain in the U.S. for longer than 90 days must apply for a B-1/B-2 visa at a U.S. Embassy or Consulate before entering the United States.

V. Exclusions

Certain types of payments, which are listed below, may be processed without further consideration of Independent Contractor status.  All of these payments are subject to IRS reporting (1099 and 1042S) as appropriate.

1. Payments to corporations;
2. Certain professional firms or partnerships (accounting firms, architectural firms, engineering firms and law firms);
3. Royalty or permission fees (including royalty payments to University employees);
4. Honorarium (payments to confer distinction or symbolize respect or admiration, paid at the discretion of the University, not as a fee charged by the person being paid and is not related to the performance of services). An honorarium paid to an employee must be paid through the Human Resources;
5. Prize or Award (reward for a competition or other scholastic achievement given to a non-employee). All payments to employees (including student employees) must be made through the Human Resources; and
6. Minimal amounts or infrequent activity will be reviewed on a case by case basis as approved by the Business Office.

REFERENCING THE POLICY

HISTORY

This is a new policy.

APPENDIX

There are no appendices to this Policy.

APPROVALS

Laura Custer, Director of Human Resources

Rob Munson, Vice President for Finance and Operations

Dr. Kathleen Jagger, Acting President