TO: Vice Presidents, Deans, Directors and Department Heads FROM: Vincent J. Lembo Vice President and University Counsel DATE: May 26, 2010 RE: Proper Classification of Individuals as Employees or Independent Contractors CC: President Aoun, Michael Armini, Stephen Director, Philomena Mantella, Diane MacGillivray, and Jack McCarthy Massachusetts law presumes that individuals providing services of any kind to employers are, unless demonstrated otherwise, classified as employees. The Commonwealth is very concerned that employers attempt to classify employees as independent contractors in order to avoid making social security contributions and providing appropriate benefits, among other things. The consequences of misclassifying an individual as an independent contractor can be severe. Financial penalties, including violations of federal and state tax and wage requirements, litigation, negative publicity, and even personal liability are among the potential outcomes. Prior to engaging the services of an individual on behalf of the University, it is important to determine whether that individual may legally be engaged as an independent contractor or whether the individual should properly be classified as an employee. To qualify an individual who is performing services for the University as an independent contractor, three criteria must all be satisfied. If all three criteria are not fully satisfied, the person must be hired as an employee. To qualify as an independent contractor, the individual must: Be free from the control and direction of the University; and Perform services that are outside the usual scope of the employer’s business; and Be customarily engaged in an independent trade, occupation or business related to the services provided. The process for engaging an independent contractor is detailed below. All steps must be followed. Further information and the complete policy can also be found on the Accounts Payable, Purchasing and Human Resources Management websites. PROCESS FOR ENGAGING AN INDEPENDENT CONTRACTOR 1. A contract must be prepared to govern the relationship. The Northeastern University Professional Services Agreement template is available at the Purchasing or the University Counsel website and may be downloaded to assist with the preparation of the contract. The contract must be submitted to the University Counsel’s office. Once reviewed, the contract will then be forwarded to the Treasurer’s office for signature, in accordance with University policy. 2. The unit or department head who seeks to hire an independent contractor must also complete the Employee/Independent Contractor Certification Form, which can be downloaded from the Purchasing website. 3. The completed Employee/Independent Contractor Certification Form and signed Professional Services Agreement must then be submitted together to the Purchasing Department, along with a purchase requisition. 4. A purchase order will not be issued without the completed Certification Form and a properly executed contract. A purchase order is required for all independent contractors, regardless of the value of the assignment. If you have any questions regarding whether an individual is an employee or an independent contractor, please feel free to contact my colleagues or me in the Office of the University Counsel at x2157.
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