Independent Contractor Policy
The Institution will in all cases comply with Federal and State regulations and guidelines with regard to classification of individuals as "employees" or "independent contractors." This Procurement procedure, Contracting for Professional Services, provides information regarding independent contractors. Should the determination be made that an individual does not qualify as an independent contractor, refer to the Institution's hiring procedures in the Personnel Practices and Procedures Manual and the Appointment and Promotion Procedures for the Scientific and Technical Staffs and Department Assistants.
Why Classification Status is Important
Whether a worker is an "employee" or an "independent contractor" is critical
when it comes to important issues such as benefits and pension eligibility,
workers' compensation coverage, wage and hour law, unemployment and many other
matters. For example, special rules - designed to protect employees - apply to
Workers' Compensation. In determining whether an individual is covered as an
employee under the Workers' Compensation laws, the State will inquire, not only
whether the worker has the right to control, but also whether the worker is a
member of the class targeted for protection by these laws. Care in
classification is critical as there is an inherent bias in favor of awarding
Workers' Compensation benefits and thus a corresponding tendency to find an
employment relationship if such a finding is at all reasonable.
If the Internal Revenue Service (IRS) reclassifies an individual from an independent contractor to an employee, WHOI will be required to pay certain amounts of the employment tax liability that was not withheld due to the misclassification. The potential consequences for violation of the independent contractor versus employee classification cannot be overstated. The worst case scenario can involve a fine and a prison sentence for the employer. At the least, if an employer is found to have misclassified workers as independent contractors, the employer can be assessed for income taxes that were not withheld, and both the employee and employer's share of FICA. The employer will also be liable for FUTA. Another risk is the disqualification of qualified pension plans.
Last updated: January 14, 2015