When seeking someone to perform services for MCCCD, it is important to make the right decision about whether he or she should provide the services as an independent contractor or as an employee. The relationship MCCCD has with an independent contractor is significantly different than the relationship that it has with one of its employees. (As a starting point, envision it as the difference between your immediate family, and someone that you hire to repair the roofing on your house.)
MCCCD uses different documents to reflect those separate relationships:
- If the person should provide the services as an independent contractor
- An employment document, such as an Online Assignment Process or a Request for Personal Services form, if the person should provide the services as an employee
These guidelines will help you to ask the right questions when engaging someone to provide services to MCCCD. That's critical because MCCCD has far greater responsibilities for employees than it does for independent contractors. For employees, MCCCD, among other things, must provide a reasonably safe place to work, pay and deduct payroll and other taxes, ensure compliance with affirmative action and anti-discrimination laws, and establish personnel policies, including those relating to discipline. Independent contractors, on the other hand, have an "arm's length" relationship to MCCCD. MCCCD selects independent contractors under its procurement policies, and not through its personnel procedures. As a general rule, MCCCD's only real obligation to the contractor is to pay the contractor after it has performed the agreed-upon services.
There is no magical formula for this decision, only a set of guidelines that help the supervisor to balance the factors specific to the situation. The Independent Contractor Analysis Worksheet will help you weigh the appropriate factors.
Here are some very general guidelines on making the decision. Certain general factors, as a rule, are given more weight than others. The Internal Revenue Service emphasizes three primary criteria. They are:
- Behavioral Control - Do the facts show whether MCCCD has a right to control or direct how the worker does the work? How extensive are the instructions that the worker is given? Does MCCCD provide training to the worker about required procedures and methods, which the worker must follow?
- Financial Control - Do the facts show whether MCCCD has a right to direct or control the business part of the work? Or does the worker itself take the risk of realizing a profit or incurring a loss in its business? Who pays for the worker's business expenses?
- Relationship of the Parties - How does MCCCD and the worker perceive their relationship? For instance, does the worker receive benefits that MCCCD generally provides to its employees?
Historically, the Internal Revenue Service used a long list of factors to analyze whether someone is an independent contractor. They are stated below. Even though the IRS is now using the three, overarching factors specified above, the tricky thing about weighing any of these factors is that you don't get an answer by saying there are 13 yes's and 7 no's, so the yes's win. Some of these factors may be more important than others in the specific analysis. Here is a recap of the factors that the IRS used to use, which are still useful today:
- Are not trained by the hiring company.
- Set their own hours.
- Are not required to follow specific instructions to do the job.
- Determine where they work.
- Control their own assistants.
- Are not required to give regular progress reports.
- Don't have to do the work themselves.
- Do work not essential to the continuation of the hiring company.
- Are paid by the job, not by the hour or the week.
- Don't have a continuing relation with the hiring company.
- Control the order and sequence in which they work.
- Work for more than one company at a time.
- Furnish their own tools.
- Have significant investment in their own workplace's equipment.
- Pay their own business and travel expenses.
- Have a risk of loss.
- Have enough time to work for other companies.
- Cannot be fired as long as they meet contract terms.
- Are responsible to complete the job and cannot quit without liability.
- Make their services available to the public.
This guidance is nothing but a start to assist you in determining whether an individual should be considered for independent contractor. For further assistance, consult the Independent Contractor Analysis Worksheet. Ken Meek in MCCCD's Fiscal Department is also a resource (480-731-8945).
Procedures for Obtaining Services Through Independent Contractors
Once you've made the decision that the person should perform services as an independent contractor, you should contact your fiscal agent or the Purchasing Department for assistance. You can download a copy of the form from our Web site. See also Creating and Signing Agreements for a quick overview of the procedures.
Procedures for Establishing an Employment Relationship
If you've determined the person does not meet the standards to be independent contractor, you'll need to initiate the appropriate paperwork for the person to provide the services as an employee. To do that, you should consult either your fiscal agent, or the MCCCD Compensation Department.
Contracting with Current or Former MCCCD Employees
If a current or former employee meets the criteria for providing additional services to MCCCD as an individual contractor, Arizona conflict of interest laws dictate additional considerations and steps that you must take before allowing that person to perform the work. Note that, among other things, a current employee may not provide services to MCCCD unless MCCCD has engaged in some competitive bidding for the purchase of those services.
Here's a summary of the decision making process you must follow to determine whether to use a contract for professional services, or some form of employment, such as an Online Assignment Process or a Request for Personal Services form, to engage a person to provide services to MCCCD.
- Step 1 - Define the services to be provided. If the person wishing to provide the services is a current employee, and the services are within his or her job description, STOP. That person must perform them as part of his or her existing job.
- Step 2 - Perform the IRS analysis to determine whether the person should provide the services as an independent contractor or as an employee.
- Step 3 - Based on the analysis, use the Decision Matrix, to determine the steps and forms that need to be completed.
- Step 4 - If the person should be an independent contractor, check in PeopleSoft (or have someone do it for you) to determine whether the person is a current or former MCCCD employee. If he or she is not in either category, begin the requisition process to reserve the funds for the contract, fill out the Contract for Professional Services and send to the contractor to sign.
- If the person is a current employee, you will need to conduct some competitive bidding before you may contract with that employee as an independent contractor to provide the services. The person must also complete the Disclosure of Substantial Interest Process.
- If the person is a former employee whose MCCCD employment terminated in the last 12 months, the services the person is expected to provide involve the same matters that the person was involved with as an MCCCD employee, and the person had decision-making authority for those matters, STOP. You may not contract with this person.
- Step 5 - If the person should perform the services as an employee, work with the fiscal agent or the MCCCD Compensation Department to complete the appropriate forms and follow the proper approval process.
- Step 6 - Once the appropriate steps are complete, including the documents, for either the employment or the independent contractor process (completion of payroll steps, or contract is fully signed and a purchase order has been issued to the person), the person may begin work.
Page Updated 05/15/19