Human Resources

Independent Contractor vs Employee

Be aware that you must be careful before you put through a personal services contract to Business Services as the method to pay someone for professional advice (consultant) or to render a service (independent contractor).  There are several federal agencies, especially the IRS, who look very unfavorably on making the wrong decision.  When an individual does not meet the conditions for consultant/independent contractor status, the IRS says an employer/employee relationship exists and they must be paid on payroll.   Failure to do so subjects the University to possible penalties for failure to withhold taxes and to pay social security taxes on that employee.

Since the burden of proof is on the employer, and the rules make it hard to sustain a claim that a person in not an employee (unless it is clear that the person has an independently established business, and the worker is not under the University's essential control), you are advised not to claim independent contractor status for workers of questionable independence.

The State of Maine has increased both its review of these matters and he bar that has been set to establish Independent Contractor status.  For a summary of the issues things you need to consider, please use this link to State of Maine IC Regulations.   If you are confident that your particular situation meets the Independent Contractor standard of proof, submit a personal services contract in the manner prescribed by Business Services.  If it does not meet the standard, or if there is significant doubt, then you are advised to handle the position/person as an employee - and use the guidance on this website to hire the employee.

For more information or to have a position reviewed for Independent Contractor status, please contact M.A. Watson in Human Resources; mwatson@usm.maine.edu or 780-5279.