(Revised April 2003) Section 8.E

Section 8.E -- Independent Contractors

• Review of Employee Relationships
• Independent Contractor Checklist

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Review of Employee Relationships

The IRS has begun a major audit initiative at colleges and universities. It is likely Iowa State will be reviewed at some point in the near future. Appropriate classification of workers as independent contractors or employees has been a major focus of these audits and the subject, in general, has received considerable press coverage in relation to the payment of social security for domestic help.

To be prepared for such a review, Iowa State has clarified its policies relating to the classification of workers.

Executive Summary:

• The critical factor to consider when classifying a worker is the level of control exerted by ISU. In essence, are we directing the worker how to accomplish a task (an employee relationship) as opposed to what needs to be accomplished (indicative of an independent contractor)?

• The IRS has developed 20 questions to assist in classification (See page 8.16). Not only do these questions help focus on the nature of the relationship, they can be used to structure agreements that better delineate the intended relationship between ISU and the worker.

• The 20 questions must be completed by departmental personnel who are familiar with the activities of the worker. This should be done prior to the initiation of the work to avoid any misunderstandings with the contractor. The questionnaire will be reviewed by the college. Accounting personnel are available for assistance in structuring these arrangements; call (515) 294-2556. Penalties assessed by the IRS for incorrect classification may be the responsibility of the department or college.

• If a current ISU employee is acting as an independent contractor, he/she must be on the Board of Regents approved vendor list. Please inform employees in your area of this requirement and have them contact Purchasing if they are likely to be in this category.

• If a current ISU employee is acting as an employee performing additional or irregular duties, a portion of the employee's salary should be "bought" by the hiring department. If this is not possible, additional compensation may be appropriate. The procedures for requesting additional compensation are included as Attachment #3 located on page 8.17 of this handbook. Questions on additional compensation should be directed to the assistant to the vice provost for finance.

This guide is located in the ISU Office Procedure Guide at 12.6 as it further clarifies existing procedure.

For more information about independent contractors contact (515) 294-2556.

Section 8.E Return to top

Independent Contractor Checklist (To be completed by person requesting service)
Please explain any responses in the non-shaded areas.	Yes	No
1. Is the worker allowed to perform services for a number of firms at the same time?	___	___
2. Are the worker's services regularly available to the general public?	___	___
3. Does this agreement prevent the worker from doing other gainful work during the period of the agreement?	___	___
4. Can the worker realize an economic loss for non-performance other than the loss of payment for personal services?	___	___
5. Is the worker free to establish his/her own hours?	___	___
6. Has the worker invested in facilities in order to perform the services?	___	___
7. Will a significant portion of the work be done in ISU facilities?	___	___
8. Will worker receive training?	___	___
9. Does a continuing relationship for an ongoing task exist?	___	___
10. If assistants are needed, will these be provided by ISU?	___	___
11. Will the University determine the order or sequence of the tasks to be completed?	___	___
12. Is a progress report or time sheet required for performance evaluation?	___	___
13. Will the worker be paid on an hourly basis?	___	___
14. Will the worker be reimbursed for incidentals?	___	___
15. Will ISU furnish tools other than specialized equipment?	___	___
16. Is worker required to comply with instructions other than general project parameters?	___	___
17. Does the success of the project hinge on the performance of the worker?	___	___
18. Must services be rendered personally?	___	___
19. Can the worker be discharged for convenience as one would an hourly employee as opposed to discharge related to contract requirements?	___	___
20. Can the worker unilaterally terminate the contract prior to completion?	___	___

Conclusion: Worker is: [ ] Independent Contractor -- Complete Honorarium

[ ] Employee -- Complete Form 111

Preparer: ______________________________ Reviewer: ____________________________________

09/14/93

Section 8.E Return to top

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Revised April 30, 2003. Content questions? Ask the experts.
Comments or suggestions? Contact the committee, (e-mail: ofcguide@iastate.edu)