Independent Contractor

Overview

"Independent Contractor" refers to the hiring of an individual and exhibits these characteristics:

• Individual cannot be a current or recently separated (2 years) employee at SJSU or any other state agency
• Can be an individual person, a sole proprietorship, an incorporated entity, or other established firm or business
• Subject to the control or direction from the university only as it relates to the results of the work performed
• Engaged in a distinct profession and are in the business of providing services related to the job being contracted
• They have total control over the work being performed, set their own hours, pay for their own business expenses, and provide their own equipment, liability insurance, and office space
• It is typically of such a specialized or technical nature that the knowledge, experience, or abilities are not available through the normal hiring process
• Services to be performed as an independent contractor must not displace the work of any bargaining unit employee or fall into one of the CSU Classification and Qualification standards
• The worker is free from the employer’s control and direction
• The worker performs a service that is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed
• The worker customarily engages in an independently established trade, occupation, profession, or business

All individuals must be considered “employees” unless they go through the review process and are approved to be paid as Independent Contractors. Approval from UP is required before work can begin. The questions on the form (which comprises the Dynamex Test) must be applied to all workers before services are rendered. An individual cannot be hired as both an employee and an independent contractor for the same employer at the same time.

Campuses must comply with State/Federal laws and CSU policies regarding the proper classification of employees and independent contractors. Misclassification of a worker as an independent contractor can result in considerable wage and benefit obligations, financial penalties, tax consequences, and other liabilities.

The process will ask individuals to indicate if they currently work for SJSU or any other state agency, that they have valid work authorization, and if applicable, a background check is required if an individual will perform duties that would require the background checks to be conducted if performed by CSU employees.

• Independent Contractor Request Form [DocuSign]
• Tech Letter HR/Salary 2021-07 - Independent Contractor vs Employee determinations [pdf] [CSU login required]

If Approved as Independent Contractor

Upon approval of Independent Contractor status, departments must submit the approved form to the Finance department and work with them to issue payments. The individual is subject to a background check based on the work they will perform.

If Not Approved as an Independent Contractor

These workers must be hired as employees. Contact your staff recruiter to review the eligible classifications.

Questions

For further assistance or questions, please email classcomp@sjsu.edu.

Public Contract Code Restrictions for CSU Employees FAQs

These FAQ's address restrictions resulting from Senate Bill 41, IRS rules and CSU Conflict of Interest Code [pdf]. Additional and outside employment opportunities for CSU employees also may be limited by restrictions in other state laws and collective bargaining agreements, not addressed in this document.

Restriction 1:

A CSU employee, except for those employees with teaching or research responsibilities, may not "contract on his or her individual behalf as an independent contractor with any California State University department to provide services or goods." (PCC 10831).

• How can a CSU employee provide a needed service to the CSU?

  • The CSU employee can be hired as an employee of the CSU (e.g., utilizing the "special consultant" classification or additional employment), as long as the employment is not funded by a CSU contract with a vendor to perform services for or on behalf of the vendor).

• Can a CSU employee be employed by and/or contract with a CSU foundation or auxiliary to provide a needed service or expertise?

  • CSU employees can be employed by or contract with the CSU foundation or an auxiliary, provided that the employees’ activities are not funded by a CSU contract between the CSU foundation or auxiliary and meet the definition of Independent Contractor. Otherwise, additional employment provisions may apply.

• Can a CSU employee receive a "stipend" or "honorarium" payment through Accounts Payable for services provided to another CSU campus?

  • No.

• Can a CSU employee contract with a state agency other than the CSU to provide a needed service?

  • No, because the state agencies all make payments to employees as a single employer through the State Controller’s Office. The Internal Revenue Service (IRS) requires that all payments made by a single employer to an employee be reported on a W-2, not on Form 1099.

• Can a CSU employee with a specialized skill or expertise contract with the CSU to provide a needed service?

  • No. This violates the CSU Conflict of Interest Code. Additionally, as noted above, the IRS would require that payment be reported to the individual as an employee on a W-2.

• Are there any exceptions?

  • No.

Restriction 2:

A CSU employee, except for those employees with teaching or research responsibilities, may not engage in any employment or activity for which the employee receives compensation through or by a CSU contract, unless the employment or activity is within the course and scope of the employee’s regular CSU employment. (PCC 10831).

• What determines if an employee’s work on an activity funded by a CSU contract is within the course and scope of the employee’s regular CSU employment?

  • A CSU employee's position description or employment agreement may identify activities that the employee might be required to perform on an activity funded by a CSU contract. However, it may be that an activity is only an occasional part of the employee’s job, and not specifically identified in the position description, but is within the course and scope of the employee’s regular employment. The CSU, as the employer (not the employee), appropriately determines whether the activity is within the course and scope of the employee’s regular CSU employment. If the CSU appropriately designates the activity as within the course and scope of employment, the employee can be compensated as an employee.

• Can a CSU employee have his/her activities funded by a CSU contract?

  • No.

• Can a CSU employee provide a needed service or expertise to the CSU if the employee is hired by a private sector entity to do work that is funded by a CSU contract?

  • No.

• Does this restriction apply to employee contracts with a CSU auxiliary, where the auxiliary has contracted to perform a service for CSU?

  • Yes.

Restriction 3:

For two years following retirement or separation from CSU employment, no former employee may enter into a contract "in which he or she engaged in any of the negotiations, transactions, planning, arrangements, or any part of the decision-making process relevant to the contract while employed in any capacity by any CSU department." (PCC 10832 (a)).

• Can a CSU employee who participated in the planning or procurement process relevant to a proposed contract enter into that same contract after he/she retires or is otherwise separated from CSU employment?

  • No.

• Can a separated/retired employee who participated in the planning or procurement process contract with the selected vendor to assist the vendor in meeting its CSU contract obligations?

  • Yes.

• Can a separated/retired employee be hired as an employee by the selected vendor to assist in meeting the contract obligations?

  • Yes.

• Do "negotiations, transactions, planning, arrangements, or any part of the decision-making process relevant to the contract" include technical support?

  • If the separated employee provided limited technical support to the planning or procurement process as requested, but did not participate in planning or decision-making, the restriction does not apply.

• Can a separated/retired employee be rehired by the CSU as an employee to provide a service related to the selected vendor’s contract?

  • Yes. However, the timing of the hire must not conflict with CalPERS re-employment restrictions.

• Can a separated/retired employee who participated in the planning or procurement process contract with the CSU to provide a service related to the selected vendor’s contract?

  • Yes.

Restriction 4:

For 12 months following retirement or separation from the CSU, no former employee may contract with the CSU if he or she was employed by the CSU "in a policymaking position in the same general subject area as the proposed contract within the 12-month period prior to his or her retirement…or separation." Exempted are contracts for expert witness services and contracts to continue attorney services. (PCC 10832 (b)).

• Can a separated/retired employee in a policymaking position contract with a different CSU campus to provide services in the same general subject area?

  • No. Even though CSU campuses and the Chancellor’s Office are separate employers, for the purpose of this restriction, a systemwide preclusion applies.

• How can CSU secure needed expert services or skills of former employees?

  • CSU can hire former employees as continuing CSU employees. This restriction does not prohibit the rehire of former employees or retirees. However, the timing of the retiree hire must not conflict with CalPERS re-employment restrictions.

• Can a CSU employee in a policymaking position who separated/retired provide contract services to another state agency other than the CSU within 12 months of separation in any area of expertise?

  • Yes. This restriction applies only to CSU contracts.

• Can a former employee in a policymaking position be employed by or contract with a foundation or other auxiliary to provide services to CSU in his/her subject area?

  • Yes. However, if the former employee is retired, the timing of the retiree hire and work to be performed must not conflict with CalPERS re-employment restrictions.

• Can a former employee in a policymaking position provide needed service or expertise to another state agency, if that agency has a contract with the state?

  • Yes. However, if the former employee is retired, the timing of the retiree hire and work to be performed must not conflict with CalPERS re-employment restrictions.

• What is a policymaking position?

  • An employee in a policymaking position sets or recommends CSU policy. Management Personnel Plan administrators are in policymaking positions. Network analysts generally are not in policymaking positions. Each campus must review a separated/retired employee’s prior position to determine its policymaking impact.

• What does "in the same general subject area" mean?

  • This language should be interpreted broadly. If an employee specialized in one area of, for example, human resources, that employee would be subject to the 12-month restriction from all areas of human resources. If a campus academic administrator managed the Business school, s/he could not contract for work developing a business curriculum.

• Can a CSU employee in a policymaking position who retires/separates provide services in his/her subject area on a contract basis to the CSU within 12 months of separation?

  • No. There are two limited exceptions: Contracts for expert witness services and contracts to provide continuing attorney services.