Employee or Independent Contractor
Appropriately determining the status of a worker as either an employee or an independent
contractor is required to protect both WVU as an institution as well as our workers.
Misclassification of a worker can lead to financial penalties to the University,
as well as preventing the worker from qualifying for benefits they are entitled
to receive (such as unemployment).
At WVU, WVU Tax Services is responsible for the determination of whether a worker is considered an employee or an independent contractor. To assist in determining if a worker should be treated as an employee or an independent contractor, WVU Tax Services has developed the Independent Contractor Determination Form [PDF] based on the Internal Revenue Service (IRS) areas of focus. This form must be completed in any instance where a department wishes to make payments to a worker as an independent contractor instead of as an employee, and when the worker is an individual, a sole proprietorship, or a single member LLC entity.
In general, there is no singular factor that will lead to a worker being classified as an employee instead of an independent contractor. The determination is made after a holistic review by WVU Tax Services which includes three areas of focus designated by the IRS. The primary exception to this is in the case of active or recently separated University employees. Active or recently separated University employees cannot be paid as an independent contractor. These workers must be paid as employees through WVU payroll unless they can provide proof that they have an established business separate from their WVU employment. This applies even if there is a change or reduction in duties, hours worked, or department within the University making payments.
Please note that a worker is not permitted to self-elect to be treated as an independent contractor instead of an employee. If a determination is made that the worker should be treated as an employee, they must be treated as an employee regardless of the worker's preference. In situations where independent contractor status is rejected, a department should contact their HR Partner Team to begin the process of hiring the worker as an employee.
The Independent Contractor Determination Form is not a contract or service agreement and cannot be used in place of a contract or service agreement. Departments should work with WVU Procurement, Contracting, and Payment Services (PCPS) to establish and execute a service agreement or contract separately from completing the Independent Contractor Determination Form.
Employee vs. Independent Contractor
The IRS focuses on three areas when determining if a worker should be treated
as an employee or as an independent contractor: behavioral control, financial control,
and relationship of the parties. Worker classification establishes the tax withholding
and reporting obligations of each party. It also establishes what benefits the
worker is (or is not) entitled to and what additional costs WVU may be required
to cover.
For workers classified as employees, WVU is required to withhold the appropriate federal, state, and FICA taxes on their payments. WVU is also required to pay the employer match portion of FICA taxes. Additionally, WVU may be required to offer employee benefits (including but not limited to vacation and sick leave, worker's compensation insurance, retirement, and health insurance). The employee's earnings, as well as taxes withheld, are reported on Form W-2, Wage and Tax Statement.
For workers classified as independent contractors, WVU is not required to withhold the taxes listed above; the worker is responsible for making payments directly including employer match portion of FICA taxes. Independent contractors are generally not eligible for any benefits from WVU. Although WVU is not required to withhold taxes on payments made to an independent contractor, we must report payments of $600 or more in a calendar year on the appropriate Form 1099 (generally Form 1099-NEC, Nonemployee Compensation).
Behavioral Control
Behavioral control focuses on the level of control WVU has over the completion of work. Examples include:- Is the University concerned with the step-by-step methods (the
how) of completing the work, or only the end result?
- Is the University providing the tools, equipment, and materials for completing the work, or is the worker providing their own materials?
- Is the worker required to complete the work at a University facility, or can the work be completed off-site?
In general, higher levels of control over the worker's behavior lead to a higher
likelihood of a worker being classified as an employee. A true independent contractor
should be able to complete the work following the methods of their choosing and
should generally be able to provide their own equipment instead of requiring
equipment provided by WVU. Although some exceptions exist (for example, a contractor
coming to a WVU location to complete repairs on an immovable piece of specialized
equipment), a true independent contractor should not be required to complete
work at a WVU facility.
Financial Control
Financial control focuses on the level of control WVU has over the finances of the worker and the worker's opportunity to make a profit or loss on a job. Examples include:- Does the worker have an independently established business related to the work they will perform for WVU and through which they will receive payment, or are they receiving payment in an individual capacity (i.e., payments are being made to the worker in their own name)?
- If the worker will be receiving multiple payments, will the payments be made regularly and on a fixed schedule, or will payments be made once the worker meets specific pre-agreed upon milestones without respect to the amount of time the work took?
- Is the worker responsible for covering all expenses related to the work being performed, or is the worker receiving reimbursement from the University for expenses related to the work?
In general, higher levels of control over the finances of the worker lead to
a higher likelihood of the worker being classified as an employee. A true independent
contractor should generally have an independently established business that
offers services to the general public. Payments for work should be tied to
completion of specific milestones or deliverables instead of paid on a fixed
schedule without consideration of progress towards completing goals. Independent
contractors should also be responsible for covering all costs related to performance
of services; these costs should be accounted for in the price the worker sets
when offering services to the University and the worker should have the opportunity
to make a profit or loss on their work.
Relationship of Parties
Relationship focuses on the general relationship between WVU and the worker. Examples include:- Does the worker have a continuing relationship with the University (either as a contractor or as an employee)?
- Are the activities being performed by the worker a key aspect of the University's business and mission?
- Is the worker part of a team of other workers treated as employees by the University?
In general, a closer relationship between the worker and the University leads
to a higher likelihood of the worker being classified as an employee. A true
independent contractor will generally not be performing work that is central
to the University's business and mission. An independent contractor's relationship
with the University will generally only last for the length of time it takes
to complete a pre-agreed project or amount of work. Although the worker may
have repeated contracts with the University and work on multiple different
projects, there may be gaps between the contracts instead of a continuous
relationship between projects.
Requests for foreign national independent contractors are reviewed by WVU Tax Services on a case-by-case basis. Departments should contact WVU Tax Services for guidance before offering an independent contractor role for a foreign national.
Foreign National Individuals
Foreign nationals (i.e., anyone that is not a U.S. citizen or lawful permanent resident/"green card" holder) may not be eligible for consideration as an independent contractor (whether they are physically present in the United States or not). In addition to the standard Employee vs Independent Contractor review conducted by WVU Tax Services, additional determinations must be made based on the worker's nonimmigrant status (sometimes referred to as their "visa" or "visa status"). Foreign nationals who violate work restrictions on their nonimmigrant status may have their status terminated by U.S. Citizenship and Immigration Services and may be denied future admission to the United States by U.S. Customs and Border Protection. There may also be negative impacts to the University for permitting work by unauthorized foreign nationals.Requests for foreign national independent contractors are reviewed by WVU Tax Services on a case-by-case basis. Departments should contact WVU Tax Services for guidance before offering an independent contractor role for a foreign national.