Assessing Independent Contractors
Effective January 1, 2020, due to changes in California law, including California Assembly Bill 5 (commonly referred to as AB-5) and AB-2257, a new test was established to determine whether a worker may be classified as an independent contractor (IC).
For International ICs: For International ICs: Engagements of independent contractors performing work outside of the U.S., regardless of citizenship, are analyzed separately from the Domestic Independent Contractor review process. Please contact the USC Office of Global Initiatives to initiate review.
Manager’s responsibilities
Regardless of the employee category type ultimately selected, individuals are not permitted to start work at USC until the hiring review and engagement process is complete. The university cannot retroactively place someone in a staff, faculty, or independent contractor status. Managers will be held responsible should they allow an individual start work at USC without the proper approvals beforehand. Where required, disciplinary action will be taken.
Independent Contractor request process step by step guide
Independent Contractor process – Frequently Asked Questions
What does AB-5 mean for USC?
Unless an exemption provided under California state law applies, Independent Contractors must meet all three of these requirements (the “ABC” test):
A. Worker completes work independently and outside of direct supervision/control of employer
- USC must establish the worker is free of such control. A worker who is subject to the type and degree of control USC typically exercises over employees (either as a contractual right or in actual practice) is considered an employee. USC could be exercising this control even without controlling the precise manner or details of work.
B. Work being conducted is outside normal business activities of the organization/company
- USC must establish the worker performs work that is outside the usual course of departmental business. Therefore, contracted workers who provide services in a role comparable to an existing employee will likely be viewed as employees.
- Example where services are not part of the hiring entity’s usual course of business: A retail store hires an outside plumber to repair a leak in one of its bathrooms.
- Example where services ARE part of the hiring entity’s usual course of business: A bakery hires cake decorators to work on a regular basis on its custom-designed cakes.
C. Worker is customarily engaged in work of the same nature as the work being conducted
- USC must prove the worker is customarily and currently engaged in an independently-established trade, occupation, or business. USC cannot unilaterally determine worker status simply by assigning the worker the label “independent contractor” or by requiring that the worker, as a hiring condition, enter into a contract that designates the worker as an independent contractor.
- To qualify as an independent contractor, the worker’s independent business operation must be already established at the time the work is performed. An individual who has decided to go into business generally has established and promoted that business. Examples of this include:
- Incorporation, licensure, advertisements
- Routine offerings to provide the business’ services to the public or a number of potential customers
- If an individual’s work relies on a single hiring entity, that individual most likely would be considered an employee of that hiring entity, not an independent contractor.
Other differences
- Unless an exemption provided under applicable state law applies, other USC employees cannot be providing the same services
- All Independent Contractor approvals are now routed through the Independent Contractor Program Office (See “Resources and help” below)
- A new end-to-end process is involved (see below)
Fundamental questions to appropriately classify Independent Contractors vs employees
- What type of working is being conducted?
- Where is work being conducted?
- How much oversight does USC exercise in relation to the work?
- Does the provider have other clients?
- How does the provider market their services?
End-to-end process
USC’s end-to-end process requires HRPs to be much more involved in workforce planning and initial evaluation of independent contractors. The newly implemented automation tool, known as Lincware, supports the identification of “red flags” that may potentially disqualify workers as independent contractors. This automation replaces the paper Worker Status Evaluation Forms, Worker Information Request Worksheets, and Independent Contractor Agreements used in the past. The process below lists the steps involved in evaluating and onboarding Independent Contractors.
Managers who decide to proceed with acquiring an independent contractor will start the process in the Lincware tool which can be accessed here. The automated process generates and routes the required Independent Contractor documentation to the appropriate individuals based on the workflow.
- Manager determines the need for additional support and initiates a strategy meeting with their HRP and SBO to assess the need, determine funding needs, and consider budget approval.
- Manager, HRP and/or SBO discuss appropriate work classification (employee, fixed term employee, temp, resource employee, per diem employee, student worker, or Independent Contractor) for potential role, considering factors such as:
- Scope of work
- Length of work
- Skills required
- Cost of work
- Oversight required by USC
- Location of work
- Interaction with members of USC community
- If the Independent Contractor role is determined to be the most appropriate, the manager identifies the potential worker. The manager should consult their HRP if they require search support.
- The manager or HRP initiates automated Worker Information Request Worksheet (WIRW) at least 14 days prior to start of work. An introductory email along with a link to the automated Work Information Request Worksheet (WIRW) is generated. The link to the automation tool can be accessed here. The potential IC will complete and submit the automated WIRW.
- Upon completion of the WIRW, the manager and the HRP will be notified via email and provided a link to the Work Information Request Worksheet (WIRW) for Review.
- The manager and HRP complete the Work Status Evaluation Form (WSE). The information submitted by the IC will be preloaded into the WSE. All information on the WIRW will default to a read only state. This read only state will only be turned off if the manager checks the need to edit content in the WIRW. If the manager does so, the fields will become editable and the manager will be required to upload documentation (such as an email between the manager and the contractor) that supports the reason for the change.
- Any answer on the WSE that triggers a concern will be displayed via red text explaining the reason for the concern (also referred to as a ”red flag“).
- The HRP will indicate their own approval/decline decision. Red flags will require a justification from the manager/HRP if they decide to recommend the IC for approval.
- Automated email reminders will be sent to the HRP for applications pending supplier or HRP action.
- The document will be forwarded to the Independent Contractor Program Office for review.
- Upon receiving the application, the Independent Contractor Program Office will initiate the New Supplier Process in Jaggaer Marketplace.
- As part of this review, Risk Management and on occasion the Office of the General Counsel will need to provide guidance on responses from an insurance risk and legal perspectives, respectively.
- Please note that both the HRP and the application initiator will be able to view the application status through the dashboard feature.
- The Independent Contractor Program Office will review the application to determine if approved or denied.
- If the application is denied, the Independent Contractor Program Office will notify the HRP and share the basis for the rejection.
- If the application is approved, the HRP and manager may move forward with submitting the proposed engagement to Procurement for processing.
- Procurement requires departments to submit the final PDF, generated by the automation tool upon approval, when creating the requisition for new purchase orders. See link to Procurement Services below in “Supplemental information/resources.”
Process documents
- Domestic Swim Lanes Process Flow Document
- Worker Information Request Worksheet (WIRW)
- Work Status Evaluation Form (WSE)
Roles in the process
- HRPs/SBOs– identify resources, adhere to USC process, evaluate and suggest appropriate work category
- Managers– identify work need, skills, scope of work; identify and liaise with potential independent contractor
- Independent contractors– provide required information
- Independent Contractor Program Office – act as resource to HR Partners/SBOs, and as final approver
Most common reasons for rejection
- Another employee at USC provides these services.
- Potential IC does not provide work to other organizations or clients (determined by red flags in online application)
- Provider lacks required insurance to serve as a USC IC (determined by red flags in online application)
- ICs currently require a minimum of $1MM liability insurance.
Resources and help
- Contact the Independent Contractor Program Office
- Initiate the Lincware online portal to start the IC approval process
- USC Procurement website (Shibboleth access required)
- USC Office of Global Initiatives
- Office of Youth Protection
- IC Information Session deck from October 2021
- Labor and Workforce Development Agency
- California Employment Status page