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Employee vs Independent Contractor

General

An employee is an individual who performs a service for the University and is working under the direction and control of the University or its employees. Direction and control can be implied to exist when the employer has the right to control both the results as well as the means and methods of the worker.

An independent contractor is an individual engaged by the University to perform a specific function or task and who is free to perform this function or task completely at the individuals own discretion with regard to means and methods. The existence of an agreement or contract helps support the independent contractor position. This document should be fairly specific in what is to be provided and amount or lack of control the University has over the individual.

Factors Distinguishing Employee Status from Independent Contractor Status

Specific factors that are used by the IRS in determining whether an individual is an employee or an independent contractor are listed below. This listing is commonly referred to as the "20 factors" test.

  1. Individual is required to comply with instructions about when, where, and how work is done.
  2. Individual needs to be trained.
  3. Individual's tasks are integrated into normal business operations.
  4. Individual's services must be personally rendered.
  5. Individual is not responsible for hiring, paying or supervising assistants.
  6. Individual has continuing relationship with "employer".
  7. Individual's working hours are set by the "employer".
  8. Individual is required to devote full-time efforts to "employer's business".
  9. Individual must perform or execute duties on "employer's premises".
  10. Individual's services must conform to order or sequence set by "employer".
  11. Individual is required to submit regular oral or written reports.
  12. Individual's payment is based on time spent instead of by the job.
  13. Individual is reimbursed for travel and other expenses.
  14. Individual is furnished tools, materials, and other equipment by "employer".
  15. Individual has no significant investment in facilities (such as an Office).
  16. Individual has no risk of real economic loss.
  17. Individual is not working for more than one "employer" at a time.
  18. Individual does not make services available to the general public.
  19. Individual is subject to discharge without "employer" penalty-even if job specifications are met.
  20. Individual can terminate relationship with "employer" without worker liability.

Note: "Yes" or "True" answers are indicative of employee status.

While there is no set number of "Yes" answers which cause a person to become an employee rather than an independent contractor, some IRS auditors will try to classify an individual to employee status with only one "yes." If you have more than a few "yes" answers, extreme caution should be taken if independent contractor status is going to be claimed. See the Employee/Independent Contractor Classification Checklist for an alternative form to the twenty factors test for determining employee/independent contractor status.

Payment Processing Guidelines

All payments to Independent Contractors should be submitted on a Request for Check form (one time payments), or a Purchase Requisition form (multiple payments). These requests should be sent to the Accounts Payable Department of the University, along with the Employee/Independent Contractor Classification Checklist, a W-9 or substitute W-9 Form, and any other documents, such as a written agreement or a contract. Employees of the University may not request personal reimbursement for payments to individuals on behalf of the University.