Services retained which reach or exceed $10,000 on any one award are established under a formal agreement or contract for services.

Classifying a worker as an independent contractor rather than as an employee may appear to result in financial savings and less paperwork. However, if the employee is misclassified as an independent contractor, these perceived advantages are offset by the potential penalties that could be assessed by the Internal Revenue Service (IRS) or New York State Department of Labor, by potential Workers' Compensation or unemployment claims, and by liability or malpractice suits.

Efforts should be taken to properly classify when reviewing application budgets, when hiring an employee, or when engaging an independent contractor. 

The Research Foundation is legally obligated to properly classify workers even if a sponsor provides funds for independent contractors in an award.

The IRS provides a twenty question "Common Law Test" to assist in the classification process.   

Definitions:

Independent Contractor: An individual who, under agreement, performs a service for another person or business and who is subject to the controls of the other only in regard to the result achieved.  The contractor is not controlled in regards to the manner or means by which their services are performed.  Services provided are typically task oriented, specific in nature, short in duration, or sought based on expertise.  Compensation is usually according to an agreed upon amount or rate, for a given task.

Employee:  Generally speaking, an employee is subject to the control of the employer as to what work must be done and how the work must be done. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is enough that the employer has the right to do so.   Services performed are in the course of the general business of the employer, typically performed on-site for a long or indefinite period of time.  Compensation is usually made on a time or piece-work basis.

Engagement of Services:

A request should be made prior to engaging the service of any individual.  This will ensure that the individual is classified correctly and the appropriate documentation is obtained.  The procurement process must be followed for selection of all Independent Contractors.  Questions concerning the procurement process should be directed to the Office of Purchasing and Contracts.

Please note that the following situations are commonly referred to inappropriately as independent contractors:

Internal Contractors (Extra Service):  Work performed by a member of the University.  Work to be performed is either in a different department or involves a separate work location.  The work is done in addition to their normal University obligations.  This work is to be paid as Extra Service through the appropriate payroll department.

Honoraria: Lecturers providing an incidental lecture without requesting compensation may be paid an honoraria.  Payment should be requested utilizing the appropriate forms.

Human Subject Payment: Payment to a living individual about whom an investigator (whether professional or student) conducting research obtains (1) data through intervention or interaction with the individual or (2) identifiable private information

Participant Stipend: payment made to an individual for their attendance at an event.  Participation is not required.   Payment should be requested utilizing the appropriate forms.