CIT Policies: Independent Contractors

CIT processes and procedures related to
University Paying for Services Policy 3.5
(Independent Contractors/Consultants)

Original implementation as a CIT Protocol: June 2006
Most Recent Revision: June 2006
Responsible OIT/CIT Division and Director: Administration and Finance, Rohit Ahuja

Policy Statement

Units must determine whether a service provider should be classified as an employee or as an independent contractor before any services are performed or requisitions are processed.

Link to University Policy http://www.policy.cornell.edu/Vol3_5.cfm

CIT Implementation

Overview
The procurement of services, unlike the procurement of goods, requires an evaluation of whether a service provider should be classified as an employee or an independent contractor. This evaluation and classification must be performed before engaging an individual or entity to perform services and before any services begin. It must be based upon IRS guidelines, not on administrative ease or relative costs. There are costs and risks associated with misclassifications including potential penalties and interest from the IRS and other regulatory agencies. Per university policy, CIT has primary responsibility for independent contractor review and may be held financially responsible for any taxes, interest or penalties due to misclassification.

CIT's Division of Administration and Finance (DAF) and Human Resources Office (HR) have worked together to develop the following processes and procedures to ensure that CIT is compliant with university policy in these regards.

Process/Procedures
Whenever a CIT unit anticipates the need to obtain services from an external party, they should contact the Business Service Center (BSC) manager to begin the classification process. It is important that this discussion take place as early as possible to allow sufficient time for the required research to be completed and a determination made. Even if the services of the same person/organization has been engaged in the recent past, CIT is still required to conduct the same classification process and, although it is an infrequent occurrence, the resultant classification could be different than in the past. The classification process is not intuitive and it is best not to make assumptions based on past experiences. Likewise, determinations of classification for a given consultant made by non-CIT units/departments are not pertinent; CIT is still responsible for performing their own classification.

The BSC manager will follow the steps outlined in university policy to determine the appropriate classification for each service engagement. To do so, the BSC manager will ask the CIT unit manager hiring the consultant to complete the university's Independent Contractor Checklist and the consultant to complete the university's Independent Contractor Questionnaire; both forms are returned to the BSC manager for classification. This determination is reviewed with the director of DAF who approves the classification and signs the forms.

If the consultant is classified as an independent contractor, the BSC manager will send the necessary documentation to Purchasing along with the purchase requisition and contract documents. (See related information in next paragraph concerning contract documents.) Additionally, there may also be insurance requirements that must be met. The BSC manager will consult with Purchasing and Risk Management to determine what proofs of insurance coverage the consultant will be required to submit, if any. If a determination is made that the consultant does not meet independent contractor classification criteria, the CIT unit manager will be referred to CIT's HR unit to discuss appointing the consultant as an employee.

This classification process may be relatively simple and straightforward or it may require substantial research and consultation with CIT HR and/one or more university offices. The BSC manager is required to sign and attest to an independent contractor checklist as part of this process as well as ensure that any insurance requirements are met. The determination of this research will allow the BSC manager to give the requesting CIT unit explicit direction on how to proceed to obtain the needed services. In most cases, it is recommended that CIT's Independent Consultant Agreement (ICA) be utilized as the contract instead of the consultant's own contractual documents. The respective division's DAF business analyst should be contacted to assist with this process.

As noted previously, there are significant risks to CIT and the university if the appropriate steps are not followed and if an inappropriate classification is made, so plan accordingly so the BSC manager can exercise due diligence to ensure compliance and a proper classification.

Related Forms

University Forms: Independent Contractor Questionnaire http://www.payments.cornell.edu/cm_images/uploads/forms/cu_pay_contractorquestionnaire.pdf
Independent Contractor Checklist http://www.payments.cornell.edu/cm_images/uploads/forms/cu_pay_contractorquestionnaire.pdf
CIT Forms: [None]

Related Documents and Policies

University Documents and Policies: University Conflict Policy http://www.oria.cornell.edu/coi/
University Office of Human Resources (OHR) Policy 6.13.1, Conflict of Commitment http://www.ohr.cornell.edu/policies/nonacademic/1011h_oppractice/6131.html
CIT Documents and Policies: Independent Consulting Agreement

Violations

Process
Violations of this policy should be reported to DAF (Rohit Ahuja, 5-5954, ra78). If you choose to report violations to your supervisor, unit manager, division director or a CIT HR representative, those individuals should discuss the violation with DAF. If you choose to make an anonymous report, you may do so through the Cornell University Hotline: https://secure.ethicspoint.com/domain/en/report_custom.asp?clientid=6357

Consequences
Violations of this policy may result in disciplinary action up to and including termination of employment.

Definitions

University definitions are marked with an asterisk, all others are CIT definitions.

Term	Definition
Business Service Center (BSC)	The DAF unit that provides transactional and other business support services to OIT/CIT operating divisions and units.
Division of Administration and Finance (DAF)	The organization that provides financial and administrative support for OIT/CIT divisions and units, comprising Administrative Support, the Business Service Center, Facilities and Finance.
*Employee	"A person appointed through the Office of Human Resources and paid through payroll to perform services for the university. The university controls and directs the service provider's activities."
*Independent Contractor	"An individual or entity engaged to perform services and commonly referred to as a consultant, freelancer, contractor, etc. The service provider is responsible for the means and methods for completing the job based on specifications in the contract. The service provider is not supervised or controlled by Cornell employees."
*Service Provider	"An individual or entity engaged to perform a service. Commonly referred to as a worker."
*Services	"Activities in which labor is the major factor and note merely incidental to the production, acquisition and/or delivery of a good."

FAQ/Examples

Question	Answer/Examples
Can I hire a former Cornell or CIT employee as an independent contractor?	In some cases, you can, but not always. There are a lot of considerations and each situation must be examined on a case-by-case basis. At a minimum, the candidate would have to meet all the Independent Contractor qualifications, but other legal issues are also at play. It is best to consult with a CIT HR representative for guidance on the specific situation prior to discussing it with the individual or making assumptions.

Contacts

Subject	Contact	Phone	E-mail
Policy Clarification Responsible Director	Rohit Ahuja	5-5954	ra78
Hiring/engaging consultants	Kim Tilton (BSC Manager)	5-8760	kmt1
Bid requirements for services	Kim Tilton	5-8760	kmt1
Preparing an Independent Consulting Agreement (ICA)	Respective division business analyst: Agelia Dumas Erica Jessup Pat Nelson Scott Sheavly	5-5528 5-5183 5-5525 5-1363	ayd1 ej36 pas2 sls26
Hiring temporary, part-time, casual employees	Tammy Blasz Jennifer Russler Shannon Veley	5-4981 5-3051 5-4696	td13 jcr9 sev25

Any other questions should be directed to Kim Tilton, 5-8760, kmt1.