3.3.6 Independent Contractors
- Policy
Being imperative that Piedmont University abides by Internal Revenue (IRS) and Department of Labor regulations the following guidelines are provided for determining whether certain personal service arrangements create an employee/employer relationship or independent contractor relationship.
IRS Regulations require that Piedmont University be responsible for the payment and/or withholding of federal and state unemployment taxes, FICA, and income taxes for those individuals for who an employer/employee relationship exists. Independent contractors are responsible for those liabilities.
The Fair Labor Standards Act (FLSA) regulations state that minimum wage and overtime provisions do not apply to contractors with economic independence who are in business for themselves. Otherwise, applying the definitions from the FLSA, workers who are economically dependent on the business of the employer, regardless of skill level, are considered to be employees and are covered by the minimum wage and overtime provisions of the FLSA.
The following economic reality test factors went into effect in March 2024 and provide guidance on establishing whether an individual can be classified as an independent contractor.
Economic Reality Test Factors:
- The worker’s opportunity for profit or loss.
- The relative investments by the worker and the employer.
- The degree of permanence of the work relationship.
- The nature and degree of control an employer has over the person’s work.
- Whether the work the person does is essential to the employer’s business.
- The worker’s skill and initiative.
The following is a non-exhaustive list of examples of services as being performed by independent contractors.
- Short Course instructors (i.e., conference/workshop) where credit towards a degree is not granted by Piedmont University upon successful completion.
- Athletic gameday officials, University Interscholastic League judges and assistants.
- Accreditation evaluation services.
- Financial and legal services provided by individuals who perform these services for the general public.
- Guest speakers, artists, and professional models.
- Medical services that are provided by individuals who perform services for the general public.
- Photography, videography, or graphic services.
- Provides goods or products only.
- Rental Services – facilities and equipment.
- Tuning/Adjustment of University musical instruments.
Independent Contractors
Independent Contractors are all other individuals who are not Piedmont University employees. A contract must be in force that covers substantially the following:
- Statement that individual is responsible for all federal and state unemployment taxes, FICA, and income taxes.
- Responsible for their liability insurance.
- State that they do not consider themselves to be an employee of Piedmont University.
- Statement of understanding that FLSA minimum wage and overtime provisions do not apply to independent contractors.
- Starting and completion dates of the program.
- Will not require that office space be provided.
- Will not be performing “extra work” for Piedmont University.
- Generally, compensation is based upon completion of contract and not on an hourly basis.
When a department or college has determined the possible need for an independent contractor the following steps must be taken.
- Complete the New Vendor Request Form.
- Vendor completes the IRS W-9
- Complete the Independent Contractor vs. employee questionnaire.
- Complete the Independent Contractor Authorization.
- Vendor Agreement prepared by Finance and Vendor must sign.