Why is proper classification important? It is important for the University to properly comply with state and federal laws. The IRS and state revenue agencies keep a close eye on businesses that hire Independent Contractors. Since relationships with Independent Contractors begin at the department level, staff and faculty must make very sure that the person hired is an Independent Contractor and not an employee. Misclassifying a worker can result in serious financial penalties in a state or federal audit.

What is an Independent Contractor? An Independent Contractor is engaged in a distinct profession and is in the business of providing services related to the job being contracted. Independent Contractors have total control over the work being performed, set their own hours, provide their own equipment, liability insurance, and office space.

What is the process? The risk of hiring an Independent Contractor can be greatly minimized by following the procedures below. These things must be done before you start using the worker.

Complete the Independent Contractor Determination Checklist.pdf: This form is completed by the prospective Independent Contractor and the campus department head. Answering the questions provides information that shows whether the worker is operating an independent business. Some determining factors are: does the worker have a business card and letterhead stationery? Is the University providing free equipment or office space? Does the worker determine how and when the job will get done?

After the checklist is signed and completed, Procurement Services will review and determine if the worker is classified appropriately. Procurement Services also reviews a list of CSUS employees to make sure the individual has not been paid as a CSUS employee in the past twelve months. If an individual has been an employee within the last twelve months, they must continue to be paid as an employee regardless of current circumstances.

If the individual is approved as an Independent Contractor, the department attaches the checklist to a requisition or a Special Lecturer form.

If the person has been determined to be an employee, then the payment will be made by Payroll. The department should contact Human Resources for the appropriate paperwork.

Contracting for Services: A written contract helps avoid misunderstandings about what services the Independent Contractor is supposed to perform, payment, deadlines, and other matters. Procurement Services will initiate a contract for you after we have received a requisition and an approved checklist. A written contract is required regardless of the dollar amount.

Special Lecturer: A Special Lecturer is an Independent Contractor who is paid for a one-time speaking engagement, musical performance, training, etc. Departments should submit a completed Special Lecturer form (available from Stores) to Procurement Services to initiate payment. The checklist must be attached.

These procedures apply to all transactions regardless of funding source. If you are using auxiliary funds, please contact Auxiliary and Business Services at 3148 for appropriate paperwork before proceeding.