WORKER CLASSIFICATION

A WORD ON POLICY Financial policy promotes the proper stewardship and general guidelines for the appropriate and legal uses of LUC funds. The University receives, from a variety of sources, funds that carry with them certain fiduciary responsibilities. Inherent in these responsibilities is the requirement to operate the institution under guidance set forth by the Board of Trustees, to follow Generally Accepted Accounting Principles (GAAP), and to comply with all federal, state, and local rules and regulations, while supporting the University's mission. Adherence to accountable plan requirements It is also important to note that the policies adopted by the university are meant to be the criteria which departments must minimally abide. Departments may elect to establish internal policy and procedure that is more restrictive that these established at an organizational level. At no time can internal policy be less restrictive.

Any individual that provides a service will be considered an EMPLOYEE unless a justification can be made to the contrary. All existing University Policies and Procedures must be followed in conjunction with the Worker’s Classification Procedure –Purchasing Policy –Sponsored Program Accounting Policy WORKER CLASSIFICATION

It is the responsibility of each department to ensure that all necessary documentation is completed and evaluation/classification is determined before any services are rendered. Any modifications to existing agreements are also required to obtain approval and certification before any new engagement or services are rendered. RESPONSIBILITY

It is the Policy of LUC to properly document each request for a worker classification. Documentation required for evaluation should include the following: –Independent Contractor Review Form –Non-Resident Alien Independent Contractor Review Form (for non-US payees) – See Non-Resident Alien Independent Contractor policy and procedure located on the Finance Policy Page. –Form W-9: Request for Tax Payer Identification Number and Certification –Form W-8BEN: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (for non-US payees) –A Signed Contract or Letter of Agreement –Certificate of Liability Insurance Contact Risk Management for confirmation if necessary – extension DOCUMENTATION

Important Note: Payment can not and will not be made without all required documentation. We advise that departments convey this information to the prospective worker in question. Should they refuse to comply with our policies, we recommend identifying alternatives for the services required. DOCUMENTATION con’t

CLASSIFICATION CRITERIA COMMON LAW FACTORS Most likely considered an IC if you:Most Likely considered an employee if you: BEHAVIORAL CONTROL Factors that show whether a hiring firm has the right to control how a worker performs the specific tasks he or she has been hired to do  Do not give him or her instructions on how to perform the work  Do not provide training  Do not evaluate how the worker performs  Provide instructions that the worker must follow about how to work  Give the worker detailed training  Evaluate how the worker does the job FINANCIAL CONTROL Factors showing whether a hiring firm has the right to control a worker’s financial life  Has a significant investment in equipment and facilities  Pays business or travel expenses him or her self  Makes his or her services available to the public  Is paid by the job  Has an opportunity for profit and loss  You provide equipment and facilities free of charge  You reimburse the worker’s business or traveling expenses  The worker makes no effort to market his or her services to the public  You pay the worker by the hour or other unit of time  The worker has no opportunity for profit or loss – for example, because you pay by the hour and reimburse all expenses. RELATIONSHIP OF THE WORKER AND HIRING FIRM Factors showing whether you and the worker believe he or she is an IC or Employee  You do not provide employee benefits such as health insurance  You sign an IC agreement with the worker  The worker performs the services that are not part of your regular business activities  You provide employee benefits  You have no written agreement  The worker performs services that are part of your core business

Based upon the finding of the review, an individual classified as an employee will be set up as such in Human Resources. The employee will track his or her hours in the Kronos Time and Attendance System, receive payments, including proper tax withholdings, through Payroll Services and they will receive a W-2 for their earnings. Under an employer and employee relationship, the employer must withhold all applicable income tax and the employer’s portion of social security and Medicare taxes. LUC is also required to pay a portion of the Social security, Medicare and unemployment taxes on these wages. Employees are issued W-2, Wage and Tax Statements, detailing all taxes withheld from wages. Employees may also deduct unreimbursed business related expenses on Schedule A of their income tax return. Under the LUC accountable plan, employees are able to request reimbursement for all travel and business related expenses (see Travel and Business Expense Policy EMPLOYEES

If the individual is deemed to be an Independent Contractor, they will be set up in the Accounts Payable vendor master. Payments will not be made without ALL required documentation including a certified FORM W-9. Accounts Payable will not withhold taxes from payments made. All amounts exceeding $600 for a given calendar year will be reported to the IRS as Non-Employee Compensation (Box 7) of Form MISC. Independent Contractors are responsible for paying their own income and self-employment taxes and may deduct business related expenses on Schedule C of their income tax return. INDEPENDENT CONTRACTORS

A worker classified as an Independent Contractor cannot have an engagement period exceeding 12 months. On a quarterly basis Accounts Payable will evaluate all IC’s in the Vendor Master. Accounts Payable will make every effort to follow up with each department when an engagement is scheduled to expire. Any IC that has an expired engagement period will be inactivated and no payments will be made until updated documentation is received. All certification renewals must be completed and approved in advance by Human Resources and Accounts Payable before any new engagement begins. This includes any changes in relationship, agreement or engagement deliverables. QUARTERLY REVIEW/RENEWAL

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