This policy provides guidelines for properly engaging independent contractors pursuant to the classification requirements provided by the Internal Revenue Service and the U.S. Department of Labor.
This policy applies to all employees of CWI that participate in the contract process.
Employee: An individual whom CWI has the right to control and direct with regard to the work to be accomplished and the process by which the work is accomplished.
Independent Contractor: An individual who provides a highly technical or unique service, or has a particular set of skills not available elsewhere at CWI. Independent contractors typically are in business for themselves, are not economically dependent on CWI, provide similar services or skills to other organizations or third parties, are not supervised by CWI, and are needed only for a short duration to complete a specific project.
Certain services required by CWI are provided by independent contractors who are not employees of CWI. Whereas, an employer must generally withhold federal income taxes, social security, and Medicare taxes, and pay unemployment tax on wages paid to an employee, payments to independent contractors are not subject to such withholding. Significant tax and legal consequences including penalties may result if an individual who meets the IRS's or Department of Labor's definition of an employee is erroneously treats as an independent contractor. Thus, CWI must ensure that employees and independent contractors are appropriately classified.
For audit purposes, purchases made prior to the latest revision of this policy are subject to that version of this policy in effect at the time the purchase process was initiated. Purchases made after the latest revision date of this policy are subject to this policy as amended.
When determining whether an individual is an employee or independent contractor, the relationship between the individual and CWI must be examined. In making the determination, any information that provides evidence of the degree of behavioral and financial control and independence in work must be considered. If a Department is unsure as to the individual’s status type, it must complete a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding which can be found at the IRS’s website located at and obtain from the individual a completed and fully signed Form W-9. Both documents are to be submitted to the Contracts Group. Status as an independent contractor will be determined by the Contracts Group and Office of General Counsel. Once a determination has been made, the Contracts Group will prepare the appropriate Contract.
When determining whether an individual is an employee or independent contractor, the degree of behavioral control should be considered. Behavioral control refers to facts that show whether CWI has a right to direct and control how an individual completes a task for which the individual is retained including:
When determining whether an individual is an employee or independent contractor, the degree of financial control should be considered. Financial control refers to facts that show whether CWI has the right to control financial aspects of the individual’s work including:
When determining whether an individual is an employee or independent contractor, the type of relationship between the individual and CWI should be considered. Facts that show the parties’ relationship include:
The written contract or agreement describing the relationship the parties intend to create;
Whether CWI will provide the individual with benefits including insurance, retirement plan contributions, vacation or sick pay (typically provided only to employees);
The permanency of the relationship (independent contractors are usually retained for a defined term); and
The extent to which services performed by the worker are a key aspect of CWI’s regular business activity. Independent contractors are usually retained to handle irregular or specialized tasks or projects; in contrast, if the work is integral to CWI’s business, it is more likely that the individual should be classified as an employee.
Forms are located on the Internal Revenue Service website located