Purpose

To establish a policy and to guide project directors and others in the use of Independent Contractors that are paid $5,000 or more on projects and accounts administered by the Research Foundation.

Definition

An Independent Contractor is an individual or firm providing specific personal services free from the direction and control of performance including the means and methods used to accomplish the work. The general test is one of control i.e. that an individual is an Independent Contractor if the entity for which the services are performed has the right to direct only the result of the work and not control the means or method of accomplishing that result.

Applicability

This policy applies to all projects and Research Foundation accounts that will engage the services of an Independent Contractor to be paid $5,000 or more for its services.

Background

Grants and contracts are awarded to the Research Foundation with the assumption that there is the staff and technical expertise to carry out the project without extensive outside assistance. Occasionally, Independent Contractors supplement a project's technical needs and provide specific services to the Research Foundation.

Independent contractors can fall into two categories:

  • A company or firm providing service to the public or broad clientele. This includes organizations supplying temporary office services.
  • Individuals who are clearly in business for themselves and offer their services to the general public, and as such are self-employed e.g. accountants, lawyers, physicians, photographers, artists, and other professionals as well as those in an independent trade or business. This includes one-time professional lecturers. As a rule, if the determination is unclear, the prospective individual/consultant should be classified as an employee. The IRS employs a number of factors to appropriately classify Independent Contractors. Determinations are made on a case-by case-basis. Some of the IRS factors are listed herein, but for further guidance the director may access the IRS website at WWW.IRS.gov (refer to Publication No.1799) Note: the final determination regarding the appropriate classification of the Independent Contractor will be made by the Research Foundation.

Factors supporting employee classification:

  • The work to be performed is substantially similar to the work of other employees.
  • The services to be provided are generally performed by or incorporated into the operations of the college or the Research Foundation.
  • The individual will require on-going training and direction regarding the completion of the task or the individual will receive more than simple general directions and statement of objectives.
  • The individual will report to a Research Foundation or CUNY employee who has the right (even if such right is not exercised) to direct how, when, and where the individual performs the work.
  • Space, equipment or supplies will be provided.
  • Work is to be performed on a regular schedule (i.e. from 9:00 a.m. to 5:00 p.m.).
  • The time period for payment is on a weekly or monthly basis.
  • The individual, similar to an employee, can terminate his services without creating a liability.
  • There is a continuing relationship or prior relationship between the individual and the Research Foundation or the college, either as an employee or independent contractor.

Factors supporting an Independent Contractor classification:

  • Independent Contractor maintains a separate business with its own premises, materials and equipment.
  • Independent Contractor offers its services to the general public and can provide documentation of other clients.
  • Independent Contractor has obtained or has applied for a federal employer identification number (EIN). Independent Contractor's often have employees working for them.
  • Independent Contractor agrees to specific work for a specific amount of money (i.e., a fixed fee, hourly/daily rate) and controls the means of performing the work.
  • Independent Contractor may realize a profit or suffer a loss in connection with performing the work or services. Independent Contractors may suffer a liability for failure to complete the scope of work.
  • Independent Contractor has right to control how, when and where the services are to be performed.
  • Independent Contractor is NOT an employee of CUNY or the Research Foundation.
  • Independent Contractor does not have a continuing relationship with the college or the Research Foundation.

Policy

  • Project directors must be aware of the requirements for Independent Contractors and indicate their proposed use in grant applications or contract proposals.
  • Unless the budget is flexible, a specific budget category with sufficient funds must exist before engaging any consultant or other Independent Contractor. Even in awards with flexible budgets, using consultants may be prohibited by the sponsoring agency if they were not specified in the project proposal. Approval of the individual (or firm) by the funding agency may be required by the terms of the award or agency regulations.
  • In addition to providing a budget for Independent Contractor services, the Research Foundation must receive adequate documentation justifying the need for the services of an Independent Contractor. The PI must provide a written justification for selecting a particular Independent Contractor to provide personal services without obtaining competitive bids for such services. This justification should include detail regarding the process used to select the particular contractor, the unique area of expertise of the contractor, the reasonableness of the contractor's fee in relation to the qualifications of the contractor, his/her normal charges, and the specific nature of the contractor's services.
  • Subject to the foregoing and any funding agency restrictions, Independent Contractors who participate in a project may be paid fees consistent with the usual rates for such services. Payment in these cases is a fee for service and not salary. No income taxes, social security or other insurance contributions will be withheld or deducted.
  • The classification of an individual as an Independent Contractor or an employee is determined by the Research Foundation. An Independent Contractor Request Form (RF 803) must be submitted with the appropriate accompanying documents. It must be signed by the Project Director.
  • A written agreement (Independent Contractor Agreement) establishes the basis for payment to an Independent Contractor. The services to be provided, period of performance, rate of pay and amount to be paid should be specified. Note that:
  • Services may commence only after an agreement has been signed by all parties.
  • Reimbursement to contractors depends on satisfactory performance.
  • Except in unique circumstances, the Research Foundation will not advance payment to Independent Contractors.
  • Use of both outside and intra-university consultants, including CUNY faculty is subject to IRS regulations, government regulations, in addition to CUNY and sponsor restrictions.

Procedures

Prior to contacting an Independent Contractor, the project director should determine whether the expense is allowable under funding agency restrictions and Research Foundation policies. Any prior approvals required by award or agency regulations must be obtained.

Request for Approval of an Independent Contractor Agreement (RF 803)

This request is submitted to the Research Foundation's Office of Legal Affairs for review and confirmation of the following items:

  • compliance with all applicable regulations and policies;
  • acceptability of determination of Independent Contractor status;
  • availability and encumbrance of funds.

The following supporting documentation should be submitted with the request:

  • A written work statement outlining the work to be accomplished (a "Scope of Work.") The Scope of Work should outline what will be accomplished, the dates by which tasks are to be completed, who will perform the work and where it will be performed if applicable and the method(s) by which the work will be performed, including a list of deliverables, if required.
  • A written justification indicating the necessity of particular personal services from the Independent Contractor. The specific reference regarding the need for such services in the proposal to the sponsor should be noted, if it was necessary to identify the independent contractor to the sponsor.
  • Contractor's curriculum vitae or descriptive literature, in the case of a firm. (A brief statement describing the contractor's qualifications and the basis for selection may be substituted.)
  • List of Clients, Reporting Schedule for work to be performed
  • Approval by the college or CUNY, if applicable

Independent Contract Agreement

For amounts of $5,000.00 or more, the Research Foundation will enter into an Independent Contractor Agreement (ICA) with the approved Independent Contractor. The Independent Contractor Agreement will be issued by the Research Foundation's Office of Legal Affairs directly to the Independent Contractor and it will be signed by both parties.

Payments

The project director authorizes the Research Foundation to make payments to contractors.

  • For each payment, submit a signed Payment Request with an invoice reflecting services rendered to date to the Research Foundation's Department of Procurement and Payables. Indicate "Final" on the last claim for payment
  • Invoices should include: billing rate, amount due, dates and type of service; contractor's original signature, and the Project Director's certification that deliverables have been received.

Implementation

The provisions of this policy are effective January 1, 2007.