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5.6.2 Independent Contractors

​​​​​​​Certain individuals who operate their own businesses and who perform work for a location may qualify for the classification as independent contractors. Independent contractors should have a written contract (see the Independent Contractor Agreement​) and must have a current Form W-9 on file before any payment can be made for their services. Each location reports the amounts paid to independent contractors to the taxing authorities on an IRS Form 1099 and to the California Employment Development Department. See New Hire Reporting. Correctly classifying a worker as an independent contractor is critically important; contact the Human Resources Department for guidance. Significant penalties are imposed by both federal and state agencies if a location makes an improper classification.

An independent contractor relationship exists when the location:

  • Does not control the details of the job 

  • Does not furnish tools or materials; the one doing the work furnishes these items 

  • Does not control working hours, except for setting contractual deadlines and, when necessary, providing access to the workplace

  • Makes no deductions for unemployment, disability, taxes, and Social Security 

The person doing the work:

  • Has particular skills and expertise beyond the knowledge of the client 

  • Has a regular business and/or special license and performs services for many clients 

  • Pays self-employment taxes and carries applicable and required insurance 

  • Employs supporting personnel, when required

See Memorandum of 12/2013 Re Independent Contractor Definition (HR intranet; username and password re​quired) ​and Memorandum of 12/2013 Re Flat Rate/Piece Rate Compensation (HR intranet; username and password re​quired).​