Independent Contractor/Employee Classification Policy

This Independent Contractor Policy (“Policy”) applies to domestic staff and faculty of the University. The College of Global Studies will comply with local jurisdiction as it relates to independent contractor relationships within the respective country. All international independent contractor requests will be reviewed and finalized through The College of Global Studies. In situations involving current student employees, requests will be evaluated on a case-by-case basis in consultation with the Office of Student Accounts. 

Departments often engage the services of individuals who are not Employees of the University, including Independent Contractors, guest lecturers, entertainers, suppliers, and others. It is important to correctly classify Independent Contractors and Employees to ensure that proper compensation methods and tax obligations are satisfied. Improper classification may result in significant penalties to the University. For this reason, the University must approve the Independent Contractor status before services are provided. This Policy sets forth the criteria that define Independent Contractors and the required procedures to correctly classify and pay them. 

The purpose of this Policy is to define the criteria to qualify as an Independent Contractor and set forth how Independent Contractors must be paid in order for the University to remain compliant with the state and federal Departments of Labor and the Internal Revenue Service (IRS) and other regulatory agencies. 
Employees are not considered Independent Contractors. Employees are hired through Human Resources and are paid through the Payroll function. In special situations, a current University Employee or student may provide a service outside the scope of their normal position responsibilities. In these cases, even though the work is considered independent, the Employee should still be paid through Payroll with a stipend and not be issued a 1099. If an employer-employee relationship exists (regardless of what the relationship is called) the worker must be classified as an Employee and not an Independent Contractor and must be paid through the University’s payroll system. 

Independent Contractors are responsible for reporting all income earned and for paying applicable federal, state, city, and self-employment taxes. The University may withhold federal, state, or local income taxes if applicable, in compliance with published regulations. In Pennsylvania, a worker is considered to be an Employee unless proven otherwise. 

Independent Contractors are individuals, partnerships, and limited liability companies who render a service and meet certain behavioral, financial, and relationship factors as established by IRS criteria. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, speakers, performers, photographers, or auctioneers who are in an independent trade, business, or profession in which they offer services to the general public are generally Independent Contractors. However, whether these people are Independent Contractors or Employees depends on the facts in each case. The general rule is that an individual is an Independent Contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. A party is not an Independent Contractor if that party performs services that can be controlled by an employer (what will be done and how it will be done). This applies even if the party is given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed. 

An Independent Contractor is a party who meets most of the following criteria: 

A. The Independent Contractor Classification Questionnaire is a tool that can assist when considering whether a service provider should be classified as an Employee or Independent Contractor. The information provided will assist the University in determining whether an individual performing services will be classified as an Employee of the University or as an Independent Contractor for state and federal tax purposes. Prior to engaging the services of a provider, the hiring party must truthfully complete the Independent Contractor Classification Questionnaire and return it to the Office of Human Resources for a proper determination of the work status of the provider two (2) weeks prior to entering into a contract. The Office of General Counsel will not review contracts with independent contractors unless the Independent Contractor Classification Questionnaire is attached to the contract and is approved by Human Resources. 

B. An Honorarium is a gratuitous or nominal payment of money or other thing of value to a person for the person’s participation in a “usual academic activity” for which no fee is legally required, and the person expects no payment. An Honorarium is provided as a token of appreciation for participation in an activity or event, and not as a contractual obligation to pay for services rendered. An Honorarium is usually a one-time payment made to an individual (not a corporation, business, or partnership) who is an Independent Contractor and not an Employee of the University, for a special and non-recurring activity or event. A “usual academic activity” means activity conducted for the benefit of the institution and includes lecturing, teaching, consulting, conducting research, attending meetings, symposia or seminars, or otherwise sharing knowledge. 

Prior to engaging the services of any individual and/or prior to paying an individual with an Honorarium, the Arcadia University Independent Contractor Classification Questionnaire must be completed and returned to the Office of Human Resources for a determination. 

Violation of this Policy or failure to timely cooperate in complying with its provisions by any individuals who contract for services on behalf of the University may result in disciplinary action up to and including dismissal. 

This Policy is effective on the date that it is signed by the President

May 2, 2018