Contract Labor

Texas State University
Revised: 08/23/00*
Official UPPS No. 04.04.08
Issue No. 1
Effective: 08/26/92
Review: August 1 E4Y

01. POLICY STATEMENTS

01.01 We at Texas State are committed to supporting the educational mission of the institution through efficient information storage and retrieval, appropriate auditing procedures, professional personnel services, and a safe environment. The following procedure contributes to the fulfillment of this policy.

01.02 This UPPS provides explanation and clarification of contract labor considerations. This UPPS also establishes guidelines for distinguishing between staff/faculty employees and independent contractors.

02. DEFINING AN INDEPENDENT CONTRACTOR

02.01 For purposes of unemployment insurance law, anyone who provides services for the University is presumed to be an employee until the University proves to the Texas Workforce Commission that the University has no right to exercise direction or control over the work performed.

02.02 For Fair Labor Standards Act purposes, the courts have established that an independent contractor is anyone who passes the "economic reality test". This test states that the focal point in deciding whether an individual is an employee or contractor is whether the individual is economically dependent on the business to which he/she renders service or is, as a matter of economic fact, in business for him/herself. In applying this test, the courts generally focus on five (5) factors:

a. the degree of control exerted by the alleged employer over the worker;

b. the worker's opportunity for profit or loss;

c. the worker's investment in the business;

d. the permanence of the working relationship;

e. the degree of skill required to perform the work.

02.03 In addition to the factors in section 02.02, the Department of Labor (DOL) evaluates the following factors to determine whether an individual is truly an independent contractor:

a. the extent to which services rendered are an integral part of the employer's business;

b. the permanency of the relationship (this is a repetition of "d" in previous section);

c. the amount of individual investment in facilities and equipment;

d. the opportunities for profit and loss (this is a repetition of "b" in previous section);

e. the degree of initiative, judgment, or foresight exercised by the individual who performs the services.

03. LEGAL CONSIDERATIONS

03.01 The Texas Workforce Commission (TWC) is charged with auditing employers to ensure that employee wages are being reported and proper taxes paid on those wages. The TWC has the statutory authority and legal obligation to determine whether individuals are employees or independent contractors and to assess back taxes, penalties, and interest as required.

03.02 The Department of Labor (DOL) and the courts have the authority to determine whether individuals are employees or independent contractors in disputes over the applicability of the overtime provisions of the Fair Labor Standards Act and to grant back pay as required.

03.03 Both the TWC and DOL can perform unannounced audits to determine compliance with employee/contract labor requirements. Noncompliance findings can result in back tax assessments, penalties, interest and back pay.

04. PROCEDURES FOR DETERMINING CONTRACT LABOR STATUS

04.01 Account managers should realize that simply calling a relationship "contract labor" does not make it so. All aspects of the actual working relationship must be evaluated to determine if the University has the right to exercise direction and control.

04.02 In assessing each situation, account managers should use the attachments to this UPPS. Attachment I is a quick test provided by the TWC. If the account manager can answer the questions on Attachment I affirmatively, chances are good that a contract labor situation exists. Attachment II is a more comprehensive checklist. Affirmative answers to its questions would point to an employee, not a contract labor, situation.

05. PROCEDURES FOR REVIEWING AND APPROVING CONTRACT LABOR STATUS

05.01 UPPS No. 03.04.01 "Contracted Services, Including Consultants, Speakers, and Other Services" assigns responsibilities to various positions for reviewing proposed contracts. As part of these responsibilities, reviewers will also ensure that the actual working relationships described by account managers satisfy the requirements for independent contractor status. These reviewers and their areas of responsibility are described as follows:

a. Comptroller - consultant and lecturer contracts

b. Manager, Grants Accounting - services provided on research, grant accounts, entertainment and performing arts services.

06. PROCEDURES FOR PAYMENT

06.01 If the payee is determined to have independent contractor status payment will be made from the Contract Services form (see Attachment I, UPPS No. 03.04.01).

06.02 If the payee is determined to be a University employee, payment will be made by RBC through Payroll and total payment charged will include fringe benefits. The RBC should indicate that the payment is for contract work.

07. MAJOR RESPONSIBILITIES ASSOCIATED WITH THIS UPPS

07.01 Major responsibilities for routine assignments associated with this UPPS include the following:
  Position Section Date
  Asst. Vice President for Financial Services/ Treasurer* Review
05.01		 August E4Y
As required
  Chair, Faculty Senate Review August E4Y
  Chair, Staff Council Review August E4Y
  Manager, Grants Accounting 05.01 As required

08. CERTIFICATION STATEMENT

This UPPS has been approved by the following individuals in their official capacities, and represents Texas State policy and procedure from the date of this document until superseded.

Dr. Carolyn Conn, Asst. Vice President for Financial Services/Treasurer; senior reviewer of this UPPS*

Chair, Faculty Senate; reviewer of this UPPS

Chair, Staff Council; reviewer of this UPPS

Mr. William Nance, Vice President for Finance and Support Services

Dr. Jerome H. Supple, President