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 independent contractor controls when, how, and where services are performed, towards a promised deliverable as a goal. 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.
RFCUNY refers to an ICA for less than $5,000 as a Memorandum of Understanding (MOU). The governing principals are fundamentally the same.
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.
When to Submit a Request for an Independent Contractor’s Agreement
In late 2016, New York City adopted the Freelance Isn’t Free Act, which became effective on May 15, 2017.On its face, the Act would affect a substantial proportion of the independent Contractor Agreements (ICAs) and Memoranda of Understanding (MOUs) issued by RFCUNY. The Act imposes substantial penalties for non‐compliance.
To assure compliance with the Act, principal investigators (PIs) should submit requests for ICAs and MOUs no later than 30 calendar days before the contractor’s work is scheduled to begin. Planning for ICAs and MOUs and providing RFCUNY sufficient time to review and execute these contracts is a sound business practice that allows for PIs documents to be handled efficiently and effectively, rather than as a last‐minute matter.
For purposes of the 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 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; 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.
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 create ICAs or MOUs in which the work has already begun, or in which 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 the City to bring a civil action for a “pattern or practice” of violations. The penalty in such cases can be up to $25,000. RFCUNY is the party to all ICAs and MOUs on behalf of the 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, with a possible penalty of $25,000.
To assure compliance with the Act (as well as a matter of sound business practice) PIs should plan their projects to enable them to submit requests for ICAs or MOUs no later than 30 calendar days before the contractor’s work is scheduled to begin. Where a PI has allowed work to begin without an ICA or MOU in place, the college will be responsible for any penalties that may arise under the Freelance Isn’t Free Act.
Documents to Support Identification of Independent Contractors
In order to assure that a proposed worker would be an independent contractor rather than an employee, RFCUNY requires PIs to submit documentation including:
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, and an explanation as to why competitive bidding was not used to select the lowest price as indicated in RFCUNY’s ICA policy.
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 of 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. 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 on which it is based.
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