Worker Classification: Employee vs. Independent Contractor

I. Rationale/Purpose of the Policy

This policy provides the University’s procedures for assessing whether an individual performing services for the University is properly classified as a University employee or as an independent contractor. Appropriate classification of workers is essential for compliance with federal and state law and regulations, and IRS guidelines. Proper classification is also critical to preventing the University from incurring tax penalties and other liabilities. As set forth in this policy, assessment of an individual’s proper worker classification—as an employee or an independent contractor—must be made prior to the individual performing any services for the University.

II. Definitions

Independent Contractor: An individual who provides services to the University where the University may control only the result of the services, but not the means and methods of how services are performed. Independent contractors typically have skills or knowledge not available within the organization, provide similar services to other clients, and are contracted for a defined period and at a predetermined fee. Typically, independent contractors are individuals, sole proprietors, or single-member LLCs.

Employee: An individual who performs services for the University subject to the University’s right to direct and control the means and methods of how work is performed. Employees receive wages and benefits determined by the University. They have a direct supervisor who has oversight of their work and performance.

III. Scope/Compliance

This policy applies to all departments, centers, and schools and any situation involving an individual who will perform work or services for the University as a non-employee.

IV. Policy Details

I. Guidelines
The determination as to whether an individual is an employee of the University or an independent contractor is highly fact-based. However, as a general rule, an individual performing services for the University is to be regarded as a University employee, whether the service is full-time, part-time, time-as-reported, regular or temporary, unless it is clearly demonstrated and determined, through a detailed assessment, that the relationship is appropriately categorized as an independent contractor. The applicable HR Business Partner should be consulted where there are questions as to proper classification as an employee or independent contractor. Any doubts as to whether an individual is an employee or an independent contractor should generally be resolved in favor of finding an employer-employee relationship.

All actions necessary to engage an independent contractor must be completed prior to commencement of services.  The University official responsible for obtaining the services is required to complete the Independent Contractor Assessment form found on the Procurement website, generally at least three weeks before services are required. Consistent with applicable law, where an independent contractor will provide services valued at $800 or more within a 120-day period, independent contractors will also be required to sign a written professional services agreement, which can be obtained through Procurement’s website.  More time may be needed for sign-off, posting, and other pre-employment requirements if it is determined that the individual should be classified as an employee and payment should occur via University payroll.

A. An employer-employee relationship typically exists where:

• The individual performs the same or similar tasks or services as other University employees;
• An employee of the University (a supervisor) controls and/or supervises when, where, and how the individual performs their tasks;
• The University provides tools, facilities, equipment and supplies to the individual;
• The University sets the individual’s hours of work;
• The University sets the individual’s rate of pay;
• The University requires the individual to attend training sessions and/or meetings (unless the individual is employed by a third-party contractor and the training is required as a term of the contract between the University and the contractor);
• The individual must seek permission for absences;
• The University has the right to hire, fire, and discipline the individual;
• The individual devotes all of their effort to the University;
• The individual hires or supervises other University employees;
• The individual is responsible for managing University finances or budget;
  
  Where an employer-employee relationship exists, the individual must proceed through the University’s standard hiring process via Human Resources and myURHR.

B. An independent contractor relationship typically exists where:

• The individual is not a current University employee;
• The individual is not a former University employee who performed similar tasks as an employee;
• The individual performs tasks/services that are not typically performed by other University employees;
• The individual performs services for the University based on their own expertise and without the need for training by the University on how to perform the services;
• The individual does not have supervisory responsibilities over other University employees;
• The individual does not have responsibility for University funds or budgets;
• The individual performs services for the University with a substantial amount of independent judgment and the individual is largely free of supervision, direction, and control over their services (e., the individual’s method of performing the work is not supervised by a University employee);
• The individual has an established business that they independently market, has other clients, and derives a substantial part of their income from sources outside the University;
• The individual pays their own expenses;
• The individual provides all of their own equipment, tools, and supplies;
• The individual sets their own schedule;
• The individual sets or negotiates their own rate of pay;
• The individual is free to refuse offers of work from the University;
• The individual has the ability to assign their own employee(s) to perform the tasks contracted for and/or the right to subcontract aspects of the contracted for work.
  
  Where an independent contractor relationship exists, the department should follow the procedures outlined by Procurement.

C. Other important considerations in determining whether an individual is an employee or an independent contractor include:

1. Individuals who provide services relating to the University’s core mission, such as teaching, lecturing, instructing, researching, and individuals having administrative oversight of University finances should nearly always be classified as employees. Those providing patient care services also generally fall in this category, however, there are exceptions. For example, physicians who are retained for an occasional consult who have their own independent medical practice (i.e., non-URMC) and are not University faculty generally are independent contractors (unless the requisite control and supervision exists to qualify as an employee).
2. Current employees who perform services for the University different from their regular job will generally remain in an employer-employee relationship and will be paid as an additional appointment or through extra compensation (reference Policy #211) for those in Professional, Leadership or Clinical Career streams (in level C5 or above). Former employees who are returning to the University and who will be performing the same services as they performed during their employment will generally be rehired as full-time, part-time, time-as-reported (TAR) or temporary employees.
3. Arrangements with individuals who are non-U.S. based and who will provide a service in a foreign location must be reviewed pursuant to Policy 132 – Work Locations Outside of New York State or the United States
4. The existence of an agreement with the University stating that an individual is an independent contractor does not necessarily mean that they are an independent contractor. An individual who otherwise should be categorized as an employee may not waive their rights as an employee and call themselves an independent contractor simply because that is their preference.

See also:

• #133 Recruitment and Selection
• #211 Additional Work and Additional Compensation