Independent Contractor Status

The discussion over whether an individual is an independent contractor or employee has many opposing views and is interpreted federally by definitions of common law and other statues. State law also has statues that have references to employees.  There are many points of view.  There is the common law test, the Internal Revenue Service test and the economic reality test.  More detail regarding the application and definition of these tests can be found in Chapter 25 of the Michigan Public Employment and Labor Relations Law (pages 455 to 467).

For purposes of our definition we will first determine who is an independent contractor.  The college has developed a form titled "Independent Contractor Status-Determination and Documentation" to allow department administrators to access whether a true independent contractor relationship exists.  The college does not want to find itself in the Microsoft, Inc. dilemma where individuals signed independent contractor agreements and submitted invoices, but were determined by the IRS to be employees under the 20-factor criteria defining "employees" and "independent contractors".  There may be situations where an individual is a member of a group (speakers bureau, artist union, coach); but the organization does not negotiate/sign contracts.  These individuals can be independent contractors if the college does not have the "right to control" the means by which the task is accomplished.  Independent contractors services are procured by the preparing a requisition for the services required or completing an instructional services contract when contracting for instruction services.

Once this is accomplished, the conclusion should be simple.  Those who are not independent contractors are employees.  Wasn’t that easy?

Now the dilemma; those individuals who are left are employees by default.  Employee status requires the collection of certain types of forms, information, and the completion of paperwork.  They are categorized by classifications and salary and wage levels, may be represented by collective bargaining agreements and have other benefits or restrictions that commonly apply to employees.

The college has established processes for hiring full time employees, part time faculty and staff and student employees.  Any payments for services rendered; those within the scope of the job and beyond are paid through the payroll process.  The college has established contracts with agencies that provide temporary help to the college in situations where the college does not wish to commit to full or part- time employment.  What situations are left?

We are now down to casual labor for services or payments that provide recognition of but are not in direct payment of services.  Examples include honorariums, meeting a class one time, mileage stipends, day labor, etc.

First let us consider those situations where an individual has agreed to provide a personal service to LCC at an hourly rate or some other agreed upon price that can be calculated into an hourly rate.  The first decision to be made is whether to process this individual as an employee of Lansing Community College or National Career Group.  This decision should be made by first considering the interest of the college and secondly the interest of the individual.  Part-time faculty, including those part-time faculty who are assigned to teach a class that is later cancelled, are to be paid as college employees.  Individuals who are not MSPERS retirees will also be paid as college employees so they can earn additional service credit towards retirement. Individuals who are MSPERS retirees should be advised that their earnings from LCC would may affect their retirement payments.  They should be advised to contact MSPERS for assistance.

For those individuals who will become employees of Lansing Community College using the college wide Casual Position (C0000Z) the following requirements must be met:

• The assignment must be short term or one time.
• It may be used to pay faculty for training before a faculty member begins teaching his/her first part time teaching assignment, substitute teaching or honorariums where there is an agreement that requires a payment for performing the service.   Payments will be initiated by submitting a Salary Authorization Memo and a MPS form for the first payment and an MPS form for subsequent payments.

For those individuals who will become employees of Advance Employment Services the following things must be done:

• Contact the LCC benefits specialist in the Human Resources Department.  You will be provided with a packet that includes the necessary forms to make the individual an employee of Advance Employment Services.
• Advance Employment Services will invoice the college based on the time information provided and related administrative costs agreed to in the contract.
• A sub-purchase order and receiver record will need to be completed in order for a check to be issued to Advance Employment Services.

For non-employment, that is, providing a payment in recognition for some type of voluntary service or expense incurred that is not considered to be a wages will be requested by submitting a check request voucher to authorize payment.  A Social Security Number must be provided so a 1099 can be provided when required.