FAQ: When should I Use an Independent Contractor Agreement (ICA)?
Generally, an Independent Contractor Agreement (ICA) is a contract that frames the terms of a working relationship between a client and an individual. For VCU, that agreement serves as a method of obtaining services from a person, not a business, who is not connected to VCU as an employee, student-employee, or some other business relationship. The individual under an ICA agreement should have specific targeted skills or expertise, have no expectation of becoming an employee at their ICA service, not work a regular schedule, and perform work not under the direction of a VCU employee or student. Any one of these criteria would prohibit a person from being a “true” independent contractor.
The Internal Revenue Service (IRS) offers some guidance; however, the best indicator is whether the person is self-employed. Think – professionals in an independent trade, business, or profession in which they offer their services to the general public; however, the general rule is that an individual is an independent contractor if the person paying only has the right to control or direct the end result of work and not how it will be done or performed.
If an employer-employee relationship exists (regardless of what the relationship is called), a person cannot be considered an independent contractor. If a person is placed through a temp agency for specific regular function (staffing augmentation), they are not independent contractors. So active VCU employees, VCU student-employees or temporarily assigned workers are not independent contractors and should not enter or execute ICAs. Guest speakers, visual artists, performers, and panelists, if paid for their services, are independent contractors. Study participants are independent contractors. Graduate students with stipends, post doc students, interns are not independent contractors.
There are consequences to not properly classifying workers on campus. A person may be subject to more taxes. VCU could risk federal and state labor compliance issues. There are unforeseen risks to person, property and property interests. So, understanding whether a person should be considered an independent contractor and whether an ICA form is needed are very important. For more information visit : https://procurement.vcu.edu/i-want-to/pay-an-individual/pay-an-independent-contractor/.
This post was written by Ramona Taylor, Assistant Director of Contracts and Compliance