TEXAS AGRILIFE EXTENSION SERVICE RULES

25.07.01.X2 INDEPENDENT CONTRACTORS
Approved: June 19, 2001   
Revised:   August 23, 2004
Supplements System Policy 25.07, Contract Administration and System Regulations 25.07.01 Contract Administration Procedures and Delegations, 25.99.03, Contracting for External Consultants and Professional Services, and 33.99.16, Contract Workforce.

System Policy 25.07, Contract Administration and System Regulations 25.07.01 Contract Administration Procedures and Delegations, and 25.99.03, Contracting for External Consultants and Professional Services specify the types and values of contracts which must be approved by the Board of Regents, by the chancellor or designee and those which may be approved by the component CEOs. System Regulation 33.99.16, Contract Workforce, specifies the requirements which must be met before funds appropriated by the State of Texas may be expended, and identifies contract workforce reporting requirements. This rule provides the guidelines for contracts which may be approved by Texas AgriLife Extension Service (Extension) employees. The rules apply to all contracts entered into for services of consultants (engineers, architects, etc.), professional services (bookkeeping services, proposal review, web site creation, etc.), and contractors (heavy equipment services, custom farming, etc.).

On occasion, it may be more cost effective for units to engage the services of a bona fide independent contractor when specific expertise, experience and/or equipment not readily available to the unit is required to meet the unit's needs.

Any agreement or contract for the use of services must meet the common law definition of an independent contractor and specific requirements established by the Wage and Hour Division of the Department of Labor (DOL), the Texas Workforce Commission (TWC), the Internal Revenue Service (IRS), and certain other applicable employment laws. Agreements that do not meet these requirements are not binding and are invalid. Workers covered by invalid contract labor agreements will be considered and treated as employees of Extension without regard to intent of the original agreement.

In evaluating whether to use an independent contractor or an employee to perform a certain job, the administrator shall determine if the job can be performed with complete autonomy from the unit. For example, if a worker can be or is employed to perform unskilled labor, is paid an hourly rate, and is closely supervised, he/she will not meet the test of an independent contractor and, therefore, should be treated as an employee.

A. The following conditions, although not an exhaustive list, are often indicative of an employer/employee relationship:

1. The worker receives instructions on how to perform the job from Extension staff;
2. The worker is trained by Extension staff;
3. The worker must personally perform the services;
4. The order or sequence of the task(s) is established by Extension;
5. The worker can end the employment relationship at any time without liability;
6. The hours of work are established by Extension;
7. The worker is paid by the hour; and
8. The worker uses equipment provided by Extension.

B. To ensure compliance with applicable federal and state regulations when entering into an agreement with an independent contractor, the following guidelines shall apply:

1. Nature and Degree of Control and/or Supervision. An independent contractor is self-directed and legally liable to complete a specific job for a predetermined amount of money. The agreement shall state the terms of supervision and any special conditions affecting the manner in which the work is performed. Caution: Any supervision or control by Extension staff risks changing the nature of an independent contractor to an employee.
2. Opportunity for profit or loss. Payment for the completion of a job, regardless of the number of hours worked, indicates independent contractor status and establishes the opportunity for profit or loss. Caution: Hourly wages are indicative of an employer/employee relationship and may negate a unit's efforts to create an independent contractor relationship.
3. Financial liability. The party contracted to do the work may be held liable for damages resulting from failure to complete the job according to the terms of the agreement. Caution: If a worker can leave the job unfinished without incurring any legal liability, the worker may be considered to be an employee.
4. Investment in tools, equipment, supplies and/or facilities. An independent contractor is in business to provide a specific service and, in addition, will furnish tools, equipment and/or facilities necessary to perform the work. Caution: If a unit provides tools, equipment or supplies, the worker may not meet the test for an independent contractor.
5. Open market competition. Competitive bidding indicates an opportunity for profit or loss. Caution: Engaging a worker's services without a bid or proposal may alter the status of an independent contractor.

C. The following conditions, although not an exhaustive list, are often indicative of an independent contractor:

1. The worker is paid on "for the job" basis;
2. The worker has an investment in the equipment used to perform services;
3. The worker can realize a profit or loss based on performance of service;
4. The worker provides services to more than one party at a time;
5. The worker's services are advertised to the public; and
6. The worker is "doing business as" and has a federal tax identification number.

NOTE: Work that is short term or of a limited duration is NOT in and of itself, justification to pay a worker as an independent contractor.

A. Unless the services are over $2000, units are not required to obtain prior approval to employ business firms offering services (plumbing, installation and repair of electrical equipment, temporary employees, catering, welding and equipment fabrication, janitorial, vehicle maintenance and repair, and land surveying, etc.) who are listed in the yellow pages or advertise in other recognized media "doing business as." In addition, contracted hay bailing, combining/picking, etc, where the contracted individual/company meets the general requirements of a contractor as described in paragraph 2.00, do not need prior approval. However, all applicable guidelines contained in System Policy 25.07, Contract Administration and System Regulations 25.07.01 Contract Administration Procedures and Delegations, and 25.99.03, Contracting for External Consultants and Professional Services , and 33.99.16, Contract Workforce, must be followed. All applicable purchasing procedures must also be followed.

B. For all other contractual agreements with an individual to provide services, obtain prior approval from the Texas A&M AgriLife (AgriLife) Contracts and Grants Office.

C. AgriLife form AG-106, Determination of Independent Contractor Status/Contractual Agreement, will be used when entering into any contractual agreement with an individual.

D. Any questions about the applicable policies, rules or laws should be addressed to the AgriLife Contracts and Grants Office at 979-845-4781, the AgriLife Purchasing Office at 979-845-4771, and the AgriLife Human Resources Office at 979-845-2423 .