Contracts at MATC - "Independent Contractor" or "employee"?

A matter of ongoing concern within MATC is the determination of when an Independent Contractor contract can be used for outside services and when a Special Services contract must be used. The IC Contract is used if the person is an "independent contractor" and the Special Services Contract (processed through Human Resources) is used if the person is to be an employee. Any person already on the payroll of MATC as an employee must be used under the Special Services Contract route.

There is no "magical formula" for making the determination as to whether an individual performing services is an "employee" or an "independent contractor"; it depends on a balancing of factors unique in each situation.

Here are some general guidelines on making the decision. Certain general factors, as a rule, are given more weight than others. Court decisions and the IRS seem to emphasize five primary criteria. They are:

1. The worker's investment in tools and facilities.
2. The opportunity the worker has for profit or loss.
3. The right of the employer to discharge the worker.
4. The permanency of the relationship.
5. The method or form of compensation.

Internal Revenue Service Regulations set forth a long list of matters that are to be considered. Here is a recap of those 20 factors. People are independent contractors if they:

1. Are not trained by the hiring company.
2. Set their own hours.
3. Are not required to follow specific instructions to do the job.
4. Determine where they work.
5. Control their own assistants.
6. Are not required to give regular progress reports.
7. Don't have to do the work themselves.
8. Do work not essential to the continuation of the hiring company.
9. Are paid by the job, not by the hour or the week.
10. Don't have a continuing relation with the hiring company.
11. Control the order and sequence in which they work.
12. Work for more than one company at a time.
13. Furnish their own tools.
14. Have significant investment in their own workplace's equipment.
15. Pay their own business and travel expenses.
16. Have a risk of loss.
17. Have enough time to work for other companies.
18. Cannot be fired as long as they meet contract terms.
19. Are responsible to complete the job and cannot quit without liability.
20. Make their services available to the public.

The matters above are guidelines to assist in the preliminary determination on the campuses as to which form of contract to use. We have developed a checklist addressing these criteria for ease of reference in determining whether a task should be performed by an IC or employee.