Employee or Independent Contractor?

Independent contractor vs employeeFederal and state tax and labor laws require Emory University to ensure that individuals who provide services are properly classified as an employee or an independent contractor.  Proper classification of an individual will determine Emory's tax withholding and reporting obligations.

Individuals who perform services for Emory University are presumed to be employees unless the relationship, supported by documentation, satisfies the Internal Revenue Service (IRS) and state law standards for an independent contractor status. Individuals who receive a Form W-2 from an Emory entity should be paid as an employee for all services provided and typically should not also receive a Form 1099 from an Emory entity. 

Emory's Payment Services Department works collaboratively with Emory departments of procurement and contract administration, internal audit, tax, compliance, legal counsel, and human resources to determine the classification categories of payments to individuals.
Guidelines for Paying Individuals 

Classification of Employee

An employee is a person hired through Emory University Human Resources and paid via Emory Payroll.  Emory controls and directs this person's activities, both in terms of what must be done and how it must be done.  An employee may be classified as a permanent full-time employee, part-time employee or as a temporary employee. 

Some Examples of Characteristics of an Employee

- Performs duties dictated or controlled by others 
- Is given training for work to be done
- Anyone who teaches a course from which students may receive academic credit
- Performs trade type duties, e.g., clerical, janitorial, grounds keeping services, lab technicians. (Important to Note: When Emory engages a temporary agency to provide trade type services, the agency and not the individual will be considered an independent contractor.) View groups: Groups paid as Employee via Payroll
 
Who may be considered as an Independent Contractor

Independent contractorAn independent contractor,
also referred to as contractor, consultant, freelancer, etc., is an individual, sole proprietor (including single member LLC), partnership, corporation, etc., which renders services to the general public.  An independent contractor is responsible for the means and methods for completing a task based on specifications in a contract with Emory.  An independent contractor generally has multiple clients, maintains a separate workplace and is not supervised or controlled by an Emory employee. Independent Contractors do not receive Emory benefits. View Checklist of an Independent Contractor:  Checklist for Determining Independent Contractor or Employee status

Examples of characteristics of an independent contractor: 

- Operates under a business name
- May have his/her own employees
- Maintains a separate business checking account
- Advertises his/her business services
- Invoices for work completed
- Has own tools and sets own hours
- Keeps business records
  View Groups: Groups paid as Independent Contractors via Payment Services 

PRIOR to engaging an Independent Contractor
- Emory University must confirm Independent Contractor status
- Hiring official is required to complete the Emory University Checklist for Determining Independent Contractor or Employee status
- Once the form is completed, send it and a description of the duties to be performed by the individual to indcont@emory.edu for final classification of the individual
- Department will be contacted within three to five business days after receipt of form

 These groups need determination: Groups that need determination of Employee or Contractor status

Why does it Matter if a Classification is correct?

Misclassification of an individual as an independent contractor may have a number of costly legal consequences for Emory.  The fundamental difference between an employee and independent contractor from a tax point of view is that an employer withholds employment taxes, and pays FICA taxes on its employees but may not be required to do so for an independent contractor.

If an independent contractor is discovered to meet the legal definition of an employee, Emory may be liable for: 

- Wages that should have been paid to them under the Fair Labor Standards Act, including overtime and minimum wage
- Back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment
- Any misclassified injured employee's workers' compensation benefits
- Employee benefits, including health insurance, retirement, etc.

Forms/Emory Policy

- Emory University Checklist for Determining Independent Contractor or Employee

- Emory University Guidelines for Paying Individuals (Guidelines includes (1) groups paid as an Employee via Payroll (2) groups paid as Independent Contractors via Payment Services (3) groups needing determination of Independent Contractor or Employee status and (4) payments to students for awards, fellowships, scholarships, and stipends)

- Emory University Finance Policy 2.6 - Payments for Scholarships, Fellowships, Stipends, Grants and Awards  (Policy 2.6.6 - Twenty Common Law Factors for Independent Contractors)