UCR

UCR Policies and Procedures

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   Policy Title:                    Independent Contractor Agreements

  Policy Number:              750-27

Responsible Officer:

Associate Vice Chancellor of Business & Financial Services and Controller

Responsible Office:

Business and Financial Services – Procurement Services

Origination Date:

02/04/2010

Date of Revision:

12/18/2018

Date of Last Review:

12/10/2018

Scope:

Guidance on Independent Contractor Agreements

 

I. Policy Summary

       The purpose of this policy is to provide guidance when a department or organizational unit pursues an option to secure the services of an independent contractor.

II. Definitions

Employee: For purposes of this policy, a person who meets the Internal Revenue Services (IRS) criteria for an employee, and who is subject to the employer’s right to direct and control the employee’s work (i.e., the result and way tasks are performed).

For additional information, visit the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee.

Independent Contractor: An independent contractor relationship exists when the University has the right to control only the result of the service (i.e., the end product), not the manner of performance. Generally, an independent contractor produces a list of agreed upon deliverables, or completes a series of agreed upon tasks. The agreement term does not exceed a total of 12 months.

III. Policy

Arrangements to secure the services of an Independent Contractor may be entered into only when the services are so unique, specialized, or highly technical that they cannot be performed economically or satisfactorily by existing University employees.

A. These services are classified into two categories:

1. Personal

Technical or unique functions performed by a supplier that is distinctly qualified to render the services. Personal services are of a nature that the University would consider the supplier’s experience, qualifications and skills to be more important than comparative cost when selecting a supplier. Examples of personal services include translation services, technical editing, technical appraisals, transaction valuation, coaching, interior decorating, and contracts with musicians, artists and others in the performing arts.

2. Professional

Highly specialized functions, typically of a technical nature, performed by a supplier that, with respect to the services to be rendered, most commonly

a. has a professional license;

b. is licensed by a regulatory body; and/or

c. is able to obtain professional errors and omissions insurance.

Professional services are of a nature that the University would consider the supplier’s experience, qualifications and skills to be more important than comparative cost when selecting a supplier.

Examples of professional services: medicine and related medical services, and legal, accounting, architectural, and engineering services.

B. IRS Publication 1779 (rev. 3-2012) (https://www.irs.gov/pub/irs-pdf/p1779.pdf) references key considerations for Independent Contractors to determine the degree of control and independence.

For example, an Independent Contractor should:

1. provide atypical, infrequent, and non-recurring services

2. provide similar services to other clients and/or businesses outside of the University

3. engage in entrepreneurial activities in an established business, at risk for profit or loss

4. receive little or no training, supervision, or instruction from the University

5. not currently receive a paycheck from nor be a current employee of the UC system

6. not be hired as a consultant or independent contractor to circumvent the Reemployment of UC Retired Employees Into Senior Management Group and Staff Positions (Regents Policy 7706) – Frequently Asked Questions.

For example, it would be a circumvention of the policy to hire a retired employee as an independent contractor or consultant to do work that is the same or similar to work the retired employee did at the University prior to retiring.

7. determine the means and methods to use to perform services

8. provide their own supplies, equipment, etc., necessary to perform services and cost for such will be included in rate or total fee

9. maintain commercial general liability insurance to protect against work-related injuries and damage to University property

10. set their own priorities on time, amount of effort, and hours of work

11. NOT provide services that are similar to those currently being provided by UC employees.

IV. Responsibilities

      A. Requestor – Department

       1. Consults with Central Human Resources’ Policy Analyst to determine the nature of the work relationship (e.g., independent contractor or employee).

2. Completes the Independent Contractor (Individual) Pre-hire Information Form.

3. Creates a Purchase Requisition.

4. Obtains a Certificate of Insurance in the minimum coverage amounts (required).

a. The insurance coverage protects against claims of bodily injury and property damage liability for work performed on behalf of the UC as well as the litigation costs to defend against such claims.

b. If an Independent Contractor does not have insurance, vendor/ contractor insurance is available for a fee to the contractor. UC has contracted with Marsh Campus Connexions to provide an annual policy to vendors and contractors performing work on behalf of the University of California.

For more details about the vendor/contractor insurance program and/or to apply go online to: Campus Connexions (ucriver.campusconnexionsuc.com).

5. Submits the completed Purchase Requisition, Independent Contractor Form and Insurance Certificate to Procurement Services.

B. Human Resources

Reviews the Independent Contractor Classification Form to determine if the work should be classified as an FTE (Full Time Employee) position.

C. Risk Services – Liability Manager

1. Reviews insurance certificates for compliance. Collect and retain a copy for tracking purposes.

2. Advises Procurement Services and Requestor on additional coverages that may be required.

3. Evaluates and make recommendations on requests to modify insurance requirement(s).It is the responsibility of the campus Accounting Office-Accounts Payable unit to comply with the procedures for Federal income tax withholding and reporting, as specified in the Independent Contractor Guidelines for Federal Tax Purposes.

D. Procurement

The Director of Procurement has been delegated the responsibility for overall administration of independent contractor procedures and agreements. Designated procurement staff member will:

1. Review Purchase Requisition, proof of insurance, classification worksheet and any Risk Services and Human Resources comments.

2. Determine if additional information will be required from the department or proposed independent contractor.

3. Consult with appropriate offices as necessary.

4. Approve or deny a request for use of an independent contractor.

E. Campus Accounting

      It is the responsibility of the campus Accounting Office-Accounts Payable unit to comply with the procedures for Federal income tax withholding and reporting, as specified in the Independent Contractor Guidelines for Federal Tax Purposes.

IV. Procedures

Request Approval for an Independent Contractor

A. Department:

1. Identifies a need for an independent contractor.

2. Consults with Central HR to determine the nature of the work relationship (e.g., sole proprietor, a corporation an independent consultant or an independent contractor or employee)

3. Completes an Independent Contractor Classification Form.

4. Determines if there is a conflict of interest.

a. The Political Reform Act of 1974 requires UC employees to disqualify themselves from participating in the making of decisions in which they have a financial interest, including contracts involving spouses or domestic partners.

b. If the proposed contractor is a current or former UCR employee, departments are strongly encouraged to acquire the services through the standard recruitment and promotion selection process (refer to local procedure for PPSM: 20 – Recruitment and Promotion) or the UC rehired retiree process (refer to Reemployment of UC Retired Employees Into Senior Management Group and Staff Positions (Regents Policy 7706) – Frequently Asked Questions).

c. For proposed contracts with independent contractors, whether with near relatives, current or former employees, the department is required to complete the Report and Certification of Proposed Transaction Involving a Potential Conflict of Interest form from the procurement analyst and obtain approval from authorized signors.

d. If the proposed contractor is a near relative to a current UCR employee, and the employee had any involvement in the contracting decision, Procurement must make the determination that the goods or services to be acquired are not available commercially or from within the University prior to proceeding.

5. Creates a Purchasing Requisition in eBuy, which is required for any dollar amount.

6. Obtains a Certificate of Insurance with the required coverage from the proposed independent contractor.

A contractor must provide a copy of the certificate(s) of insurance prior to performing work, in amounts consistent with UC policy and with the insurance policy endorsed, as applicable, to add the Regents of the University of California as an additional insured.

7. Submits a completed Purchase Requisition with attachments to Procurement for processing of independent contractor request.

B. Procurement:

1. Completes the Independent Contractor Classification form review process.

2. Determines the necessary steps to approve or deny the request.

3. Communicates the final decision to the department.

VI. Forms/Instructions

• Independent Contractor Classification Form

• Report and Certification of Proposed Transaction Involving a Potential Conflict of Interest Form

VII. Contacts

     Contact                                                             Phone                                                        Email

     Procurement Services                                     (951) 827-3001                                         Gae.Purvis@ucr.edu
Procurement Analyst IV

Risk Services                                                    (951) 827-3206                                         Richard. Rycraw@ucr.edu
Liability Program Manager

HR Policy Analyst                                            (951) 827-2622                                          hrpolicy@ucr.edu

VIII. Related Information

BFB-BUS-43; Purchases of Goods and Services; Supply Chain Management (Section III Policy Text, Part 5: Employee-Supplier Relationships)

BFB-BUS-63; Insurance Requirements and Certificates of Insurance

Guidance on Compendium of Conflict of Interest and Integrity Policies

Independent Contractor Guidelines for Federal Tax Purposes

Reemployment of UC Retired Employees Into Senior Management Group and Staff Positions (Regents Policy 7706) – Frequently Asked Questions

UCR Local Procedure 20: Recruitment and Promotion

IX. Scenarios

     Scenario                                                                                                                                                                                                            Pay as Independent Contractor

•   A department wants to hire a programmer analyst from another department to build a website.                                                                  Not permitted.1 

•   A department wants to purchase a microscope from an employee.                                                                                                              Not permitted.

•   A full-time Assistant III (non-exempt) also plays the harp. She is asked to perform at a Chancellor’s reception for $200.                           Not permitted.

•   A staff member from one department is asked to teach an aerobics course in another department, for $75 per course.                             Not permitted.

  A full-time Assistant II is asked to transcribe tape-recorded interviews from Spanish to English on an as-needed basis for $50/hour.        Not permitted.

1If necessary, the providing unit should recharge the receiving unit for services as appropriate.

2Dual employment may be approved for an employee appointed in a staff appointment (refer to PPSM-30: Compensation, Section III.B.10, Dual Employment), but it must be approved by the AVC for HR. Performance agreement should be executed. Payment should occur through payroll as additional pay.

3Dual employment may be approved for an employee appointed in a staff appointment (refer to PPSM-30: Compensation, Section III.B.10, Dual Employment), but it must be approved by the AVC for HR. Payment should occur through payroll as additional pay.

Additional Scenarios are available in UC Independent Contractor Guidelines for Federal Tax Purposes in Exhibit B.

 X.   Revision History

     The policy and associated procedures are reviewed, at a minimum every two years, by the Associate Vice Chancellor of Business & Financial Services and Controller or designee. The Chief Compliance Office updates this policy and associated procedures to reflect changes to related policies or governing standards, regulations, laws, and other such guidance as often as required.