This page provides information about hiring an Independent Contractor (IC), including legal requirements to qualify as an IC, required documentation, and other considerations.
An IC is an individual (domestic or foreign) who is independently established in a trade, business, or occupation and is exceptionally qualified to provide such professional services.
When schools or units engage an individual to perform services, Stanford must ensure the person and the work being performed meet the legal requirements for status as an IC.
University requirements
University policy requires that the worker is independent from Stanford. Stanford employees are not eligible to be ICs during, or within 12 months after, their employment due to tax policies. For questions about IC classification, departments should contact their local HR Business Partners and consult with an Employee & Labor Relations Specialist.
Federal and state requirements
The law requires correct classification of workers, it classifies all workers as “employees” unless Stanford can demonstrate all of the following conditions for an IC classification:
- The worker is free from Stanford’s “direction and control” (the worker has autonomy to determine how, when, and where to perform the work, they set their own hours, work location, and methods, they are their own boss, they make decisions about work processes, including hiring subcontractors, and they get paid only if the completed work complies with contract requirements);
- The service is outside of the school or unit’s “usual course of business” (the work being performed is not a core or regular activity of the school or unit, it is outside of typical business operations); and
- The worker is “regularly engaged in an independently established trade, occupation, profession, or business” similar to the service performed for Stanford (the worker has their own established business or professional practice, they are not simply taking on occasional jobs but have a regular independent business).
For more information see:
- California Worker classification and AB 5 FAQS (Frequently Asked Questions)
- IRS guidance at Employee versus Independent Contractor Status
If the individual and/or work being performed do not legally qualify for IC status, hiring the individual as a contingent worker may be the appropriate option. See CardinalTemps for more information.
Prior to engaging any IC, schools and units should review the Topic Overview: Selecting a Supplier or Independent Contractor, which reviews the supplier or IC selection process. Once an IC is determined, schools and units should check to see if the IC is “active” in the Supplier Query and Request System. If the IC does not have an active record, the school or unit should follow the process for setting up a new IC.
A signed Independent Contractor Checklist (IC Checklist) must be attached when submitting a contract request. Stanford’s IC Checklist helps schools and units determine whether a worker can be legally classified as an IC or should be paid as a temporary employee. Procurement Services reviews this checklist to confirm the correct IC classification because misclassifying a worker as an independent contractor can result in substantial fines that the university must pay to the government as well as judgment for unpaid wages, overtime, pensions, health insurance, paid leave, severance pay, interest on unpaid amounts and punitive damages that the university must pay to the worker.
Hiring an IC may require a written agreement with the university that is signed by Procurement Services and the IC. Payments to the IC should align with the terms of the agreement. Most ICs are not eligible for non-PO payments or reimbursements. Independent contractors generally provide professional services, which should be obtained through the procurement contracts process.
Please note: If the IC will access or use Stanford data, there are additional considerations.
