Requesting & Amending an ICA or MOU

Overview

An Independent Contractor Agreement (ICA) is the document by which RFCUNY retains the services of an independent contractor on behalf of a CUNY principal investigator (PI). An independent contractor is a worker who performs a discrete task that assists a PI in accomplishing the work the PI has agreed to perform for the award sponsor. An individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done or how it will be done. In contrast, the independent contractor controls when, how, and where the services are performed.

Independent contractors are truly independent and maintain separate businesses with their own premises, materials, and equipment. In most circumstances, an independent contractor is not an employee of either RFCUNY or CUNY. The misclassification of workers as independent contractors when they should be classified as employees is a significant issue especially in light of enhanced efforts by federal and state governments to combat worker misclassification. For that reason, active employees of RFCUNY cannot simultaneously be independent contractors of RFCUNY performing the same or similar work that they perform as employees. Also, a worker cannot be issued both a Form W-2 and a Form 1099 by RFCUNY in the same calendar year. Additional resources for analyzing independent contractor or employee classification can be found under the Independent Contractor Classification Analysis section at the bottom of this page.

RFCUNY refers to an ICA for less than $5,000.00 as a Memorandum of Understanding (MOU). The governing principals are fundamentally the same.

Compliance with New York State Law

New York State adopted the Freelance Isn’t Free Act (FIFA), which is effective as of August 28, 2024. The Act affects a substantial proportion of the Independent Contractor Agreements (ICAs) and Memoranda of Understanding (MOUs) issued by RFCUNY. The Act imposes significant penalties for non‐compliance.

For purposes of the NYS Freelance Isn’t Free Act, a “freelance worker” is a person, or an organization composed of only one person, whether or not incorporated or using a trade name, hired or retained as an independent contractor to provide services for compensation.

The central requirement of the Act is that any freelance worker is entitled to have a written contract if that person is retained to provide services for $800.00 or more (collectively over a 120-day period). The contract must itemize the services to be provided; the value of the services; the rate and method of compensation; the date by which a freelance worker must submit a list of services rendered under such contract to the hiring party; and the date on which the hiring party must pay the contracted compensation or the mechanism by which that date will be determined. If the contract does not specify either when the hiring party must pay the contractor, or the mechanism by which that date will be determined, then the contractor must be paid no later than 30 days after the completion of the services.

When to Submit a Request for an Independent Contractor Agreement or Memorandum of Understanding

To ensure compliance with the Act, principal investigators (PIs) should plan their projects to enable them to submit requests for ICAs and MOUs no later than 30 calendar days before the contractor’s work is scheduled to begin. Each submission of an ICA or MOU request must include the agreed upon rate of pay (whether that be an hourly rate, a payment schedule, or a deliverable schedule). Please note that an hourly rate of pay for an individual or sole proprietor who does not satisfy sufficient other factors to be classified as an independent contractor may not be approved. For additional guidance as to how to include rate of pay details when submitting an ICA or MOU request, please refer to the Submitting an ICA or MOU Request in Contract Manager - New Payment Provisions Section below.

Potential Penalties for Failure to Comply

It will violate the Act to require a one‐person independent contractor to start work on a project without having been given a copy of the required written contract. RFCUNY frequently receives requests to process ICAs or MOUs after the work has already begun, or even once the work has already been completed. Those situations would likely violate the Freelance Isn’t Free Act.

The Act allows a contractor to bring a civil action for damages within two years for failing to provide a written contract, or within six years for failing to make payment as required or for retaliating against the contractor for asserting a right under the Act. In addition to those private actions by the contractors, the Act also allows for the imposition of civil penalties of up to $25,000.00 for each finding of a “pattern or practice” of violations. RFCUNY is the party to all ICAs and MOUs on behalf of each requesting college. Therefore, an isolated violation by a PI at one college may be coupled with an isolated violation by another PI at a different college, and together those isolated violations may result in an action against RFCUNY for a “pattern or practice” of violations of the Act. Where a PI has submitted their ICA or MOU request less than 30 calendar days prior to the scheduled start date, or allowed work to begin without an ICA or MOU in place, the college will be responsible for any penalties that may arise under the State or City Freelance Isn’t Free Act.

Documents to Support Identification of Independent Contractors

In order to ensure that a proposed worker would be properly classified as an independent contractor rather than an employee, RFCUNY requires PIs to submit documentation including:

• Scope of Work: The Scope of Work should outline the task(s) to be performed by the contractor for the PI, the date(s) by which task(s) are to be completed, who will perform the work, where it will be performed if applicable, and the method(s) by which the work will be performed, including a list of deliverables, if required.
  • Milestone, Deliverable or Payment Schedule: In instances where a Contractor is to be paid based on an agreed up on milestone, deliverable, or payment schedule, a separate attachment detailing the schedule should be uploaded.
• Promotional Materials: Dated Client List, preferably up-to-date and showing other consulting work done by the proposed contractor within the last calendar year (to demonstrate that a contractor is in the business of consulting). Alternatively, or in addition, RFCUNY should be provided with:
  • a current, functioning website, listing the services the contractor provides;
  • recent Form 1099s to confirm that the contractor operates as a contracting business;
  • an online profile of the contractor’s business; and
  • a brochure and/or advertisement.
• Professional History: Résumé/Bio/CV.
• Contact Information: The current address, email, and phone number of the contractor or the contractor’s principal (no P.O. Box addresses).
• Retroactive Justification: If the transaction request was submitted after the performance start date, a brief statement explaining the reason(s) for the delay is required. Please note that the college will be responsible for all penalties associated with any such delays.
• Approvals: Any approvals required by the sponsor, or internal CUNY departments, if applicable.
• Tax Forms: IRS form W-9.
• Procurement Documentation: Price or rate quotations, bidding, or proposal responses, as appropriate.

Sole Source Justification

An independent contractor is usually retained to provide a service the contractor offers to others; therefore, cost is an important factor to consider when selecting an independent contractor. If a PI has not selected the proposed independent contractor through a competitive bidding process, the PI must also submit a Sole Source Justification, which is a brief statement demonstrating how the proposed contractor was selected, why the proposed contractor was chosen instead of other contractors who may have been capable of performing the work, why competitive bidding was not used to select the lowest price as indicated in RFCUNY’s ICA policy, and an explanation outlining the reasonableness of the contractor’s fee, along with any supporting documentation, such as price or rate quotations.

Some CUNY colleges have reserved the right to approve an ICA (in addition to the PI’s approval). Request for ICAs from those colleges must be reviewed and approved by the college’s Grants Officer.

Amending an ICA

An ICA (or MOU), like any other legal agreement, can be amended with the consent of both parties. A PI is not required to resubmit all the documentation submitted with the original request. Rather, the information describing the change (amendment) is needed.

If the funds being paid to the contractor are to be increased or decreased, the PI should set forth the amount of the change and must also identify how the scope of work has changed warranting the revised payment (including any change in the rate of pay). If the PI proposes to continue the contractor’s engagement to a later date, the PI should set forth the new end date for the work, as well as any change in the scope of work justifying the extension. If there is no change in the amount to be paid, No Cost Extensions would then apply.

College approval is always needed for an ICA amendment if it was required for the original ICA.

No Cost Extensions

If a PI is granting the contractor an extension of time to do the same work, for the same money, the amendment process may be simpler. No Cost Extensions may, under some circumstances, require only the submission of a payment request. The PI should inquire about obtaining such a No Cost Extension. However, an ICA cannot under any circumstances be extended beyond the closing date of the award under which it is funded.

Submitting an ICA or MOU Request in Contract Manager - New Payment Provisions Section

As the FIFA changes require that agreements include the pay rate negotiated between the parties, we added a Payment Provisions section to the MOU and ICA modules to specify payment terms for the Contractor. The particular payment provision chosen by the college from the list of five choices below will appear on the ICA cover page for new agreements and amendments.

Users must select the payment term from the following options:

1. Rate-Based: Users will enter the Contractor’s rate in this field (numeric value) and indicate the frequency of payment from the following options:
   • Hourly (please note that an hourly rate of pay for an individual or sole proprietor who does not satisfy sufficient other factors to be classified as an independent contractor may not be approved).
   • Daily
   • Weekly
   • Monthly
   • Annually
2. Milestone, Deliverable, or Payment Schedule: If the payment frequency is based on a milestone, deliverable, or payment schedule, then users will be required to upload a “Milestone, Deliverable, or Payment Schedule” document in the Attachments section.
3. Periodic Invoice Submission: If the payment frequency is based on periodic invoice submission, then a message will be shown to the user alerting them to the expected frequency of invoices, which will also appear on the cover page.
   
   • Message & Cover Page Language: Payment(s) to the Contractor will be made pursuant to the Contractor’s submission of invoices on an at least quarterly and not more often than monthly basis.
4. Upon Completion of Services: If payment will be made after completion of services, then a message will be shown to the user alerting them to the expected lump sum payment, which will also appear on the cover page.
   • Message & Cover Page Language: A lump sum payment will be made to the Contractor following completion of services.
5. Other (to be specified): If the payment structure does not neatly fit into one of the above options, users will have the opportunity to explain the payment structure by typing details into a text box. If the assigned RFCUNY reviewer has a question about these details, they will contact the college for clarification.

Many factors are considered when determining whether an individual is properly classified as an independent contractor. Please refer to the links below for further guidance regarding independent contractor analysis within overlapping federal and state regulatory frameworks.