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Departments and business units often engage the services of Independent Contractors, individuals, sole proprietors, or single member limited liability corporations (L.L.C.) who are not employees of Dartmouth, including guest lecturers, entertainers, suppliers, and others. It is important to correctly classify Independent Contractors and employees to ensure appropriate compensation method and tax compliance.
The Independent Contractors and Guests Policy defines the correct mechanism for engaging individuals, sole proprietors, or single member L.L.C. to perform services for Dartmouth and the required procedures. The Independent Contractors and Guests Policy separates engagement into three categories: Honoraria (guests), Limited Engagements, and Independent Contractor service agreements. Each category has a specific process and form(s) to ensure Dartmouth is protected.
The Independent Contractors and Guests Policy is designed to provide guidance to individuals, sole proprietors, or single member L.L.C. performing services for Dartmouth, business units, the Procurement Team and Finance Center staff to ensure appropriate processing of engagements with individuals.
This policy defines the criteria to qualify as an Independent Contractor and sets out how Independent Contractors must be engaged and paid for Dartmouth to comply with applicable state, federal, and foreign laws and policies. This policy identifies the procedures and documentation necessary to ensure proper classification, appropriate contracting for services, and subsequent payment to individuals who are deemed Independent Contractors of Dartmouth.
Employees are not considered Independent Contractors of Dartmouth, even if they are performing services outside the scope of their normal employment. Employees are hired through Human Resources and paid through Payroll. Payment for services outside of the scope of their normal employment is considered additional pay. If an employee is also a business owner who provides services outside of Dartmouth, and the business can be substantiated then they may be classified, engaged, and paid as an independent contractor.
Federal and state law require Dartmouth to correctly classify its workers as either employees or Independent Contractors. The IRS provides guidelines for classifying individuals as Independent Contractors. For individuals performing services outside the U.S. or in U.S. territories, the relevant laws are those of the jurisdiction where services are being performed. Please see "Services Performed Outside the United States or in U.S. Territories" in the Independent Contractor Services Agreements section below.
For services performed in the United States, Dartmouth must weigh the following factors in determining whether a worker is an employee or Independent Contractor:
Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an Independent Contractor. There is no "magic" or set number of factors that "makes" the worker an employee or an Independent Contractor and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
Instead, Dartmouth must document each of the factors used in making the determination and, given the entirety of the relationship, the extent of Dartmouth's right to direct and control the worker.
Dartmouth takes a risk-based approach with respect to the required procedures for engaging Independent Contractors. To that end, Dartmouth divides Independent Contractors into three types, each requiring its own unique process: Honoraria (guests), Limited Engagements, and Independent Contractor Service Agreements.
Each type of Independent Contractor has a distinct process, to allow low-risk engagements to proceed as efficiently as possible.
Honoraria:
Honoraria are payments to guests. An honorarium is a token payment made to bestow recognition to an individual for services they perform for which payment is not required. An honorarium payment may be of any amount and is taxable income to the recipient.
For a payment to qualify as an Honorarium all the following criteria must be met.
If any of the following are true, the payment cannot qualify as not an Honorarium.
If the payment does meet the criteria for an Honorarium, an Honorarium Acceptance Form is required to be completed and signed by the individual and submitted with the Payment Request eForm. If the payment does not qualify as an Honorarium, then consider whether the engagement qualifies as a Limited Engagement or requires a full Independent Contractor Services Agreement.
For additional guidance see Hiring Independent Contractors and Guests.
Limited Engagements
A Limited Engagement is defined as an engagement between Dartmouth and an Independent Contractor, where:
Below are common examples of services performed by Independent Contractors that may qualify as Limited Engagements, provided that the fee for the Limited Engagement (or all Limited Engagements over a year) is equal to $5,000 or less.
Standard Limited Engagements
If the engagement does meet the criteria for Limited Engagement, a Limited Engagement Agreement Form is completed and signed by both the individual and a Dartmouth authorized approver (see Signature Authority Policy). If the engagement does not qualify as a Limited Engagement, the engagement requires a full Independent Contractor Services Agreement.
For additional guidance see Hiring Independent Contractors and Guests.
Limited 'Works Made for Hire' Agreement for Artistic Services
If the limited engagement is for artistic services such as photography, videography, illustration, written work, or other freelance artistic creation, the Limited 'Works Made for Hire' Agreement Form is required which provides additional terms to protect Dartmouth's copyrights to the creation. If alternative terms and conditions are requested by the independent contractor, then refer to the Independent Contractor Services Agreement.
The following forms are waived for qualifying limited engagements:
Independent Contractor Services Agreements
If the payment does not qualify as an Honorarium, and the engagement does not qualify as a Limited Engagement, then Dartmouth must ensure that the individual, sole proprietor, or single member L.L.C. is documented to perform services as an Independent Contractor and Dartmouth and the individual, sole proprietor, or single member L.L.C. must enter into an Independent Contractor Services Agreement, prior to any services being rendered.
Services Performed in the United States
The individual completes and submits the Independent Contractor Questionnaire to be classified by Dartmouth as an Independent Contractor. Once an individual, sole proprietor, or single member L.L.C. is classified as an Independent Contractor, the Department or Business Unit must submit a contract request through the Agiloft Contract Management System to initiate the independent contractor contracting process. For additional guidance see Hiring Independent Contractors and Guests.
Services Performed Outside the United States or in U.S. Territories
Each country and territory have unique criteria and regulations that define whether an individual is an Independent Contractor or an employee. Incorrectly paying an individual for services performed outside of the 50 states and D.C. may adversely impact Dartmouth, as well as the individual performing the work. For this reason, all Independent Contractors performing services outside the U.S. require a full Independent Contractor Service Agreement, and some situations require review by the International Staffing Committee. See the International Work and Staffing Policy for more information, including general guidelines that apply to all work outside the U.S.
Before engaging an Independent Contractor for work outside the U.S or in a U.S. territory, the Department or Business Unit completes an International Staffing Questionnaire (instead of an Independent Contractor Questionnaire) and submits it to the International Staffing Committee at InternationalStaffingCommittee@groups.dartmouth.edu at least two weeks before work begins. The Committee will review the Questionnaire in accordance with the International Work and Staffing Policy and will respond with guidance as appropriate. After the Committee responds, the Department or Business Unit must submit a contract request through the Agiloft Contract Management System; see Hiring Independent Contractors and Guests.
As with all approved travel and other business expense reimbursements, expenses incurred by an Independent Contractor must be approved and documented according to Dartmouth's regular Business Expense Policy.
1 For high risk transactions, at least the Dartmouth Standard Terms and Conditions of Purchase must apply. These terms are not referenced on the Limited Engagement Agreement.
Exceptions to this policy need to be directed to Procurement.Services@Dartmouth.edu, prior to services being rendered.
Employee. For purposes of this policy, an employee is a worker who performs services for Dartmouth, where Dartmouth has the right to control the details of how the services are performed. Employees are hired through Human Resources and paid through Payroll. Dartmouth is generally required to report income and withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes for employees.
Honoree. An Independent Contractor who is providing services for an academic activity and for which fees are not traditionally required.
Honoraria (plural) Honorarium (singular). A payment or payments made to an Honoree
Independent Contractor. For purposes of this policy, an Independent Contractor is a worker who provides services to Dartmouth and Dartmouth does not have the right to control the details of how the worker's services are performed. Independent Contractors are hired through Procurement Services and paid through Accounts Payable. Dartmouth does not report income or withhold and pay income taxes, Social Security and Medicare taxes, or unemployment taxes for Independent Contractors.
Limited Engagement. A Limited Engagement is a category of services performed by an Independent Contractor in the U.S., for which there is low risk of personal injury or property damage and either:
Sole proprietor. Someone who owns an unincorporated business by themselves.
Single member LLC (Limited Liability Company). A business entity where there is no separation between the business and its owner for tax purposes and the owner is protected from business liabilities.