This procedure details the eight criteria which must be met in order to qualify as an independent contractor. If a department contracts directly with an individual for services, it is the management supervisor's responsibility to determine if the individual is an employee or an independent contractor. Oregon Revised Statutes 670.600 requires that, to be considered a valid independent contractor, an individual must meet eight criteria. Individuals who do not meet all eight of these points must be designated as employees and assigned to an appropriate employment category.
A valid independent contractor must meet all eight of the following points (Oregon Revised Statutes 670.600):
- The independent contractor is free from direction and control over the means and manner of providing the labor or services, subject only to the right of the person for whom the labor or services are provided to specify the desired results;
- The individual or business entity providing labor or services is responsible for obtaining all assumed business registrations or professional occupations licenses required by state law or local government ordinances for the individual or business entity to conduct the business;
- The individual or business entity providing labor or services furnishes the tools or equipment necessary for performance of the contracted labor or services;
- The individual or business entity providing labor or services has the authority to hire and fire employees to perform the labor or services;
- Payment for the labor or services is made upon completion of the performance of specific portions of the project or is made on the basis of an annual or periodic retainer;
- The individual or business entity providing labor or services is registered under ORS 701, if the individual or business entity provides labor or services for which such registration is required;
- Federal and state income tax returns in the name of the business or a business schedule C were filed for the previous year if the individual or business entity performed labor or services as an independent contractor in the previous year; and
- The individual or business entity represents to the public that the labor or services are to be provided by an independently established business.
Individuals who do not meet all eight of these points must be designated as employees and assigned to an appropriate employment category (see Employment Categories). If an employer/employee relationship exists with the individual, a Personnel Action Form is prepared and submitted to Human Resources. Payments to employees are subject to FICA taxes and income tax withholding and must be processed through the payroll system.
Departments may contract for temporary services with individuals, agencies, and organizations. This includes the services of instructional specialists, guest lecturers, industrial technicians, management consultants, etc. Payments to independent contractors are not subject to FICA taxes and income tax withholding and should be processed through the purchase order system.
For information about personal services contracts, see Personal Services Screening and Selection. For more information about independent contractors, purchasing procedures and the Independent Contractor Notification Form, see Independent Contractors.