An Independent Contractor (IC) is a self-employed individual or entity. This IC review process helps assess whether it is legally more correct to hire an individual as an employee or to pay that individual as an IC. The IC review process does not apply to large service agreements processed directly with Procurement.
Overview
The objective of the IC review process is to provide direction, clarification, and best practices for the engagement of independent contractors within the CSU and Cal Poly Humboldt. These new procedures became effective due to the California Supreme Court's adoption of a single test for determining whether a worker is an employee or independent contractor (See Dynamex Operations West, Inc. v. Superior Court decision). The test, which is now referenced as the “Dynamex Test,” requires significant changes to how Cal Poly Humboldt determines the employment relationship.
In light of the Dynamex Test, before services are performed, Cal Poly Humboldt must assess the relationship between the individual and the campus to ensure that the individual is properly classified. Misclassification of a worker as an independent contractor can result in serious wage and benefit obligations, financial penalties, tax consequences, and other liabilities.
- Complete the Independent Contractor Request Form
Independent Contractor Procedure Changes
All requests for independent contractors must pass the Independent Contractor Review Process to determine whether the worker is an independent contractor or an employee.
All workers are considered "employees" unless and until they pass the Independent Contractor Review Process.
Major Changes Effective December 1, 2022
- Before work commences, Departments submit Independent Contractor requests to Human Resources rather than Procurement.
- Human Resources reviews Department requests for Independent Contractors.
- Cal Poly Humboldt may not retain current or recently separated (2 years) CSU employees as Independent Contractors.
- Cal Poly Humboldt may not retain Independent Contractors to perform work regularly performed by campus employees. These workers must be hired as employees by using Form 104 subject to Cal Poly Humboldt hiring policies and applicable Collective Bargaining Agreements (CBA).
Independent Contractor Review Process
Human Resources, in consult with General Counsel and the Division Vice President, has final approval authority for IC requests.
Before Independent Contractor begins work:
Step 1. Department completes the Independent Contractor Request Form
- Description of Services/Justification
- The Dynamex Test is used to determine factors such as degree of autonomy or control by Cal Poly Humboldt.
- Attach the proposed scope of work outlined in a draft contract.
Step 2. Human Resources will respond to the requesting Department/Division with a decision to all requests within 5-7 business days, following receipt of all requested information.
Step 3. Human Resources notifies requesting Department/Division and Procurement of determination.
Proof of Background Check (if required)
Background Check Policy HR 2017-17 requires background checks for independent contractors if they perform duties that would require the background checks to be conducted if performed by CSU employees. In order for an independent contractor to operate under contract with the CSU or on CSU property, the independent contractors are responsible for attesting that the appropriate background check has been completed. This includes independent contractors who are performing work subject to legal background check requirements.
Independent contractors, consultants, auxiliaries and outside entities who operate under the CSU name or on CSU property are responsible for ensuring that they and/or their employees have had background checks if they perform duties and are defined as sensitive. This includes individuals who are in positions subject to legal background check requirements and/or who perform work or independent contractors entities must provide confirmation of completed and cleared background checks. For administration and/or guidelines pertaining to background check requirements for independent contractors, please refer to the Integrated CSU Administrative Manual (ICSUAM) at http://www.calstate.edu/icsuam, and contact Procurement and Contractual Services.
If Approved
Step 4a. Upon approval of Independent Contractor status, Departments create a Purchase Order in PeopleSoft. The Purchase Order is legal document issued by Contracts & Procurement to a supplier authorizing the purchase requested (Requisition) by a Department. Once issued, the Department will receive email notification that the Purchase Order has been created. For information, visit https://procurement.humboldt.edu/requisition-purchase-order-po
If Denied
Step 4b. Cal Poly Humboldt may not retain Independent Contractors to perform work regularly performed by campus employees. These workers must be hired as employees by using Form 104 subject to Cal Poly Humboldt hiring policies and applicable Collective Bargaining Agreements (CBA).
If you have questions, please contact hr@humboldt.edu
Independent Contractor FAQs
| Question | Answer |
| What is the Independent Contractor review timeline? | 5 - 7 days if all information is received. |
Public Contract Code Restrictions for CSU Employees FAQs
Important: This FAQ addresses restrictions resulting from Senate Bill 41, IRS rules and CSU Conflict of Interest Code. Additional and outside employment opportunities for CSU employees also may be limited by restrictions in other state laws and collective bargaining agreements, not addressed in this document.
Restriction 1:
A CSU employee, except for those employees with teaching or research responsibilities, may not “contract on his or her individual behalf as an independent contractor with any California State University department to provide services or goods.” (PCC 10831).
| Question | Answer |
| How can a CSU employee provide a needed service to the CSU? | The CSU employee can be hired as an employee of the CSU (e.g., utilizing the “special consultant” classification or additional employment), as long as the employment is not funded by a CSU contract with a vendor to perform services for or on behalf of the vendor). |
| Can a CSU employee be employed by and/or contract with a CSU foundation or auxiliary to provide a needed service or expertise? | CSU employees can be employed by or contract with the CSU foundation or an auxiliary, provided that the employees’ activities are not funded by a CSU contract between the CSU foundation or auxiliary and meet the definition of Independent Contractor. Otherwise, additional employment provisions may apply. |
| Can a CSU employee receive a “stipend” or “honorarium” payment through Accounts Payable for services provided to another CSU campus? | No. |
| Can a CSU employee contract with a state agency other than the CSU to provide a needed service? | No, because the state agencies all make payments to employees as a single employer through the State Controller’s Office. The Internal Revenue Service (IRS) requires that all payments made by a single employer to an employee be reported on a W-2, not on Form 1099. |
| Can a CSU employee with a specialized skill or expertise contract with the CSU to provide a needed service? | No. This violates the CSU Conflict of Interest Code. Additionally, as noted above, the IRS would require that payment be reported to the individual as an employee on a W-2. |
| Are there any exceptions? | No. |
Restriction 2:
A CSU employee, except for those employees with teaching or research responsibilities, may not engage in any employment or activity for which the employee receives compensation through or by a CSU contract, unless the employment or activity is within the course and scope of the employee’s regular CSU employment. (PCC 10831).
| Question | Answer |
| What determines if an employee’s work on an activity funded by a CSU contract is within the course and scope of the employee’s regular CSU employment? | A CSU employee's position description or employment agreement may identify activities that the employee might be required to perform on an activity funded by a CSU contract. However, it may be that an activity is only an occasional part of the employee’s job, and not specifically identified in the position description, but is within the course and scope of the employee’s regular employment. The CSU, as the employer (not the employee), appropriately determines whether the activity is within the course and scope of the employee’s regular CSU employment. If the CSU appropriately designates the activity as within the course and scope of employment, the employee can be compensated as an employee. |
| Can a CSU employee have his/her activities funded by a CSU contract? | No. |
| Can a CSU employee provide a needed service or expertise to the CSU if the employee is hired by a private sector entity to do work that is funded by a CSU contract? | No. |
| Does this restriction apply to employee contracts with a CSU auxiliary, where the auxiliary has contracted to perform a service for CSU? | Yes. |
Restriction 3:
For two years following retirement or separation from CSU employment, no former employee may enter into a contract “in which he or she engaged in any of the negotiations, transactions, planning, arrangements, or any part of the decision-making process relevant to the contract while employed in any capacity by any CSU department.” (PCC 10832 (a)).
| Question | Answer |
| Can a CSU employee who participated in the planning or procurement process relevant to a proposed contract enter into that same contract after he/she retires or is otherwise separated from CSU employment? | No. |
| Can a separated/retired employee who participated in the planning or procurement process contract with the selected vendor to assist the vendor in meeting its CSU contract obligations? | Yes. |
| Can a separated/retired employee be hired as an employee by the selected vendor to assist in meeting the contract obligations? | Yes. |
| Do “negotiations, transactions, planning, arrangements, or any part of the decision-making process relevant to the contract” include technical support? | If the separated employee provided limited technical support to the planning or procurement process as requested, but did not participate in planning or decision-making, the restriction does not apply. |
| Can a separated/retired employee be rehired by the CSU as an employee to provide a service related to the selected vendor’s contract? | Yes. However, the timing of the hire must not conflict with CalPERS re-employment restrictions. |
| Can a separated/retired employee who participated in the planning or procurement process contract with the CSU to provide a service related to the selected vendor’s contract? | Yes. |
Restriction 4:
For 12 months following retirement or separation from the CSU, no former employee may contract with the CSU if he or she was employed by the CSU “in a policymaking position in the same general subject area as the proposed contract within the 12-month period prior to his or her retirement…or separation.” Exempted are contracts for expert witness services and contracts to continue attorney services. (PCC 10832 (b)).
| Question | Answer |
| Can a separated/retired employee in a policymaking position contract with a different CSU campus to provide services in the same general subject area? | No. Even though CSU campuses and the Chancellor’s Office are separate employers, for the purpose of this restriction, a systemwide preclusion applies. |
| How can CSU secure needed expert services or skills of former employees? | CSU can hire former employees as continuing CSU employees. This restriction does not prohibit the rehire of former employees or retirees. However, the timing of the retiree hire must not conflict with CalPERS re-employment restrictions. |
| Can a CSU employee in a policymaking position who separated/retired provide contract services to another state agency other than the CSU within 12 months of separation in any area of expertise? | Yes. This restriction applies only to CSU contracts. |
| Can a former employee in a policymaking position be employed by or contract with a foundation or other auxiliary to provide services to CSU in his/her subject area? | Yes. However, if the former employee is retired, the timing of the retiree hire and work to be performed must not conflict with CalPERS re-employment restrictions. |
| Can a former employee in a policymaking position provide needed service or expertise to another state agency, if that agency has a contract with the state? | Yes. However, if the former employee is retired, the timing of the retiree hire and work to be performed must not conflict with CalPERS re-employment restrictions. |
| What is a policymaking position? | An employee in a policymaking position sets or recommends CSU policy. Management Personnel Plan administrators are in policymaking positions. Network analysts generally are not in policymaking positions. Each campus must review a separated/retired employee’s prior position to determine its policymaking impact. |
| What does “in the same general subject area” mean? | This language should be interpreted broadly. If an employee specialized in one area of, for example, human resources, that employee would be subject to the 12-month restriction from all areas of human resources. If a campus academic administrator managed the Business school, s/he could not contract for work developing a business curriculum. |
| Can a CSU employee in a policymaking position who retires/separates provide services in his/her subject area on a contract basis to the CSU within 12 months of separation? | No. There are two limited exceptions: Contracts for expert witness services and contracts to provide continuing attorney services. |