Independent Contractors/Consultants/ Attorneys
- Generally, most individuals hired by Brigham Young University–Hawaii ("university") are considered employees. However, those who meet qualifying requirements might be classified as independent contractors.
- If a division or department has determined an individual qualifies as an independent contractor or consultant, approval for hiring must be obtained prior to entering into a contract with that person. Approval for contracts should be directed to an officer of the university, primarily, the Vice President over the area where the work will be performed.
- The employment of any attorney or firm of attorneys for any purpose shall be coordinated through the Vice President for Administrative Services.
- Approval of a request will also serve as an authorization for payment of services.
LEGAL INDEPENDENT CONTRACTORS
All requests for the employment of an attorney or firm of attorneys for any purpose must be reviewed with and specifically approved by the Vice President for Administrative Services. The request will be reviewed and, if that office approves the request, outside counsel will be retained on behalf of the requesting department or division. Unless the required formal approval from the Vice President for Administrative Services is received prior to the employment of outside counsel, the Financial Services Office will not honor a request for payment of legal services.
DETERMINING INDEPENDENT CONTRACTOR STATUS
- The Common Law Test may be used in defining an employee: An individual is an employee if the employer controls who performs the job; what is to be done; with what tools and supplies; how it is to be done; where it is to be done; and when it is to be done.
- Though an employee may have the freedom at the work place to perform services at will, this does not necessarily cause the person to be an independent contractor. The right to control the work of the individual is the employer’s legal right; whether the right is exercised or not has no bearing on the status of the person. In most cases, where the employer has the right to discharge, furnish tools and supplies, and provide a place to work, the status of the individual is that of an employee.
- Where the work performance is directly connected to the purposes and goals for which other individuals are employed, the courts have been very restricting in determining the nature of independent contractors. Normally, the reasons for contracting work out, is to achieve something ordinarily not within the usual capabilities of the institution’s regular employees.
- Although not inclusive, the following are chief factors in determining independent contractor or consultant status:
- Supervision and Control. An independent contractor has the right to control and direct not only the work to be accomplished but also the details and the means by which the work is produced, and when the work will be done.
- Independence. An independent contractor can work for more than one firm at a time and has the right to delegate work and the authority to hire, fire, and establish the pay for assistants. Business is normally self-generated. In many instances, the independent contractor will have a business license and a federal tax identification number.
- Significant Investment. Independent contractors generally have a significant investment in their own facilities, equipment, premises, office furniture, and machinery; in obtaining a degree or professional license or the establishment of a business; and of capital and time in the work performed without a guarantee of profit and loss.
- Fringe Benefits. An independent contractor provides fringe benefits and is responsible for federal income tax, federal unemployment tax, and workers compensation liabilities.
- Work Location and Equipment. Although there are many exceptions, independent contractors generally provide their own work places, equipment, tools, and materials.
- Timing of Payments. Payment in lump sum, installments, or by the job generally indicates a consulting relationship even it if is based on the number of hours worked at a fixed rate per hour.
- Employment Relationship. The employment relationship ends when the job is completed. An independent contractor cannot be fired except under the terms of the contractual termination clause.
- The potential risk of making an improper designation intentionally or unintentionally can result in severe monetary penalties.
- In addition, payment of retroactive employment taxes and late tax penalties must be done. Any questions regarding whether a worker qualifies as an independent contractor should be directed to the Director of Human Resources or the office of the Vice President for Administrative Services.
UNIVERSITY EMPLOYEES AS INDEPENDENT CONTRACTORS
- Generally, a full-time or student employee may not be hired as an independent contractor. However, an employee may be hired by another department or division, if the provisions of the Fair Labor Standards Act and university policy are adhered to, i.e., payment of overtime, the 20-hour weekly maximum for student employees, etc.
- The rate of pay for full-time, temporary, or student employees must be approved by Human Resource Services. Any requests for exceptions to the policy should be submitted to the Director of Human Resource Services. The rate of pay for student employees must be approved by the Financial Aid Office. Any exceptions to this policy should be made to the Director of Financial Aid.
PAYMENT TO INDEPENDENT CONTRACTORS
An approved Independent Contractors Hiring & Payment Authorization or Contractor’s Request for Payment (Facilities Management) form must be submitted for reimbursement of services. A Limited Purchase Draft or petty cash fund may not be used to pay any wages. The requirements to properly complete an Independent Contractors Hiring & Payment Authorization form are stated in the purchasing policy. Additional questions should be referred to Accounts Payable in the Financial Services Office.
4. Related Policies and Procedures
Executive Sponsor: Administrative Vice President
Approved by President’s Council: 11/15/2001
Full revision history maintained by Human Resources.