The following information regarding contract procedures has been provided by the Office of the Vice Chancellor, Business Services of the South Orange County Community College District.
Before you process a contract, agreement or memorandum of understanding (MOU), consider the following first:
- Review the “Criteria for Distinguishing between Employees and Independent Contractors” and the IRS Questionnaire (attached) to determine whether the relationship is one of an employee or contractor. You can also find these documents online at the SOCCCD SharePoint site: https://sharepoint.socccd.edu/ > Business Services > Purchasing>Contracts and Guidelines.
- An employee may not be paid as a consultant or contractor.
- An employer may not issue a W-2 and a 1099 in the same calendar year to one individual. Example: Prior employees (in a terminated status) cannot be paid for contracted services in the same calendar year that they were paid as an employee.
- A consultant/contractor must have an independent business with its own tax I.D. number.
- The Vice Chancellor of Business Services is the only authorized signatory for all contracts, agreements or memorandum of understandings. College staff is not authorized by the Board of Trustees to sign contracts, agreements or MOUs.
- Contracts, agreements or MOUs, with a dollar value of $100,000 and above, MUST be submitted as an agenda item for board approval through your college established procedures before the Vice Chancellor of Business Services may sign.
- Contracts, agreements or MOUs with a dollar value of less than $100,000 can be signed by the Vice Chancellor without prior board approval and will be submitted for board ratification through the Vice Chancellor of Business Services.
How to Process Consultant or Contractor Contracts under $100,000
1. Fill in the contract. (A sample contract is provided at the end of this section). Be sure to enter the requisition number on the contract. Contact Vice Chancellor’s Assistant at the District office, if you have any questions.
To find the current Independent Contractor form look in the SOCCCD SharePoint site: https://sharepoint.socccd.edu/ > Business Services > Purchasing>Contracts and Guidelines.
Contracts, agreements or MOUs may come in many different formats and should be reviewed carefully before submitting to the Vice Chancellor for signature. In some cases, legal review of the document may be necessary. If so, the Vice Chancellor of Business Services office will assist you in the legal review process. However, if you use the district approved contract (sample attached), no legal review is required.
Note: 1) All blanks must be filled in, and 2) indicate all places that a signature is needed.
2. Initiate a supplier contract in Workday per the instructions in Workday training materials. This may be saved in “draft” form until a fully executed contract can be attached to the supplier contract for submission in Workday.
3. Complete a Contract Approval Cover Page. This page is available on the District’s Sharepoint site at the following link: Contract Approval Cover Page
4. Submit the contract and cover sheet to the Office of the Vice Chancellor of Business Services in accordance with the routing instructions noted on the Contract Approval Cover Page. The contract will be signed by the Vice Chancellor and mailed to the consultant or contractor. When the document is fully executed by the district and the consultant, a copy will be returned to the initiator and the original will be filed in the District Business Office.
5. A fully executed copy of the contract can be attached to the draft supplier contract and submitted in Workday.
6. Submit the invoice(s) to Accounts Payable for payment as per agreed upon schedule shown in contract. When processing invoices, ensure the following rules are adhered to:
- The designated department staff must sign the invoice(s) to verify the work was completed and is ready for payment.
- Be sure to record the supplier contract number on the invoice.
- The invoice must show the terms as stated on the contract, such as the hourly rate, the 'not to exceed' amount, and expenses if shown on the contract (expense receipts must be attached).
7. Itemized receipts are required to reimburse the consultant for any expenses. Keep in mind that:
- All expenses to be reimbursed to the consultant must be shown on the contract.
- All expenses must be paid on the same requisition as the contract payment.
- Lodging, airfare, car rental, registration fees, mileage, etc. are typically borne by the consultant and used by him/her as a deduction for tax purposes. It would be unusual for the District to pay a consultant for any expenses.
- All expenses paid will be shown on the consultant's 1099 form as income.
How to Process Consultant or Contractor Contracts of $100,000 and Over
- Process board agenda item for Consultants/Contractors through established procedures at the college. Include, as part of your board agenda item, a completed but unsigned contract marked as "Exhibit A".
- Once the contract is Board approved, follow the procedures shown above for "How to Process Consultant or Contractor Contracts under $100,000", beginning at Step 2. [Note: When forwarding contract to the Vice Chancellor's office for signature, include a note that "contract was board approved on (date)”.]
CRITERIA FOR DISTINGUISHING BETWEEN EMPLOYEES AND INDEPENDENT CONTRACTORS
A frequent source of confusion is the criteria that should be used in distinguishing whether a person performing services is an employee or a consultant (independent contractor). The Common Law Rule used by the Internal Revenue Services and Social Security to determine employee/employer relationships states:
“A Worker is an employee under the common law rules if the person for whom he works has the right to direct and control him in the way he works, both as to the final results and as to the details of when, where and how the work is to be done. The employer need not actually exercise the control; it is sufficient that he has the right to do so. Where the employer does not possess that right, the individual involved is an independent contractor, not an employee”.
In addition, the following is a list of some of the factors that might be considered:
- A person who is required to comply with instructions about when, where and how he is to work is ordinarily an employee.
- Training of an individual by an experienced employee who works with him is a factor of control because it indicates that the employer wants the services performed in a particular method or manner. Independent contractors ordinarily use their own methods and receive no training from the one who purchases their services.
- The establishment of set hours of work by the employer is a factor indicative of control.
- The furnishing of tools, materials and the like by the employer is indicative of control over the worker.
- The right to discharge is an important factor in determining whether the one possessing that right is an employer of an employee. He exercises control through threat of dismissal. An independent contractor, on the other hand, cannot be fired so long as he produces a result that measures up to his contract specifications. The fact that a right to discharge may be limited under a collective bargaining agreement does not detract from the existence of an employer/employee relationship. Compensation for consultant contracts should be as a fee for services performed, a report completed, etc., and should not include any employee type fringe benefits.
NOTE: An assignment of a District employee who agrees to perform additional services is to be processed as an employee for all purposes, even if the additional services are not related to regular duties. If, however, a regular employee maintains a formal consulting firm or is a member of a company or consulting firm, he/she may work as such and be compensated through the outside vendor. In such cases, the employee must be prepared to validate that their relationship with an outside vendor is legitimate. If the person is a retiree, he/she must be prepared to validate his/her independent contractor status or be subject to losing his/her retirement status if the maximum allowed earnings as an employee is exceeded.
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is made and entered into this __________ day of __________ , _________ between: Requisition No.
South Orange County Community College District
28000 Marguerite Parkway, Mission Viejo, California 92692-3635
Telephone (949) 582-4664
hereinafter called DISTRICT, and
hereinafter called CONTRACTOR.
WHEREAS, the DISTRICT is authorized by Section 53060 of the California Government Code to contract with andemploy an independent contractor specially trained to perform special services required; and
WHEREAS, the CONTRACTOR is specially trained and experienced and competent to perform the special servicespursuant to this agreement.
The parties agree as follows:
The period of this Agreement shall be effective from _______________________ to _______________________ and may be modified bymutual agreement of the parties. The DISTRICT shall have the discretion to terminate this contract byproviding CONTRACTOR 30 days prior written notice.
The CONTRACTOR shall, at times and places designated by it and acceptable to the DISTRICT perform thefollowing services:
The DISTRICT shall pay the CONTRACTOR $_________________________ per hour, not to exceed $__________________________ . The DISTRICT will pay expenses in the amount of $__________________________ . The total contract amount is $_________________________ (including expenses). Upon completion of the services provided for hereof and upon a signedinvoice acceptable to the DISTRICT and approved by payment will be made.
The DISTRICT shall not be liable to the CONTRACTOR for personal injury or property damage sustained byhim/her in the performance of this contract, whether caused by himself/herself, the DISTRICT, its officers,agents or employees, or by any third party. CONTRACTOR agrees to and does hereby indemnify, holdharmless and defend the DISTRICT and its governing board, officers, employees and agents from everyclaim or demand made and every liability, loss, damage or expense, of any nature whatsoever.
While performing service hereunder, the CONTRACTOR is an independent contractor and not an officer,agent or employee of the South Orange County Community College District inclusive of Saddleback Collegeand Irvine Valley College.
Neither party shall assign this Agreement or any part thereof without the written consent of the other party.
WITNESS the parties hereto the day and year first above written:
Contractor: South Orange County Community College District
By: By: Dr. Debra L. Fitzsimons
Title: Title: Vice Chancellor, Business Services
Contact Person: College Contact Person:
Contract Form Approved by Schools Legal Service, Orange County Department of Education (02/02/2002)