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FIN-6.06 - Independent Contractors

INDEPENDENT CONTRACTORS
Administrative Rule Adopted by Council
ARC-FIN-6.06

 
Purpose
The purpose of this administrative rule is to establish minimum standards for engaging Independent Contractors (IC).

 
Authority
Authority for this administrative rule is established in the City Charter and City Code. This administrative rule has been approved by the City Council.

 
Monitoring
The Accounting Division of the Bureau of Financial Services of the Office of Management and Finance (Accounting Division) will periodically monitor bureaus to assess compliance with the minimum standards of this rule. As instances of non-compliance are identified, bureaus will be required to develop and implement a corrective action plan. The Accounting Division will provide assistance to bureaus, if requested, to develop this plan. The Controller will report all instances of non-compliance annually to the Chief Financial Officer (CFO) and City Council.

 
Definitions
 
"Independent Contractor (IC)" means an individual, partnership or sole proprietorship engaged to provide services to the City that have met the requirements listed in the section "Criteria for IC Status" below. Those requirements are based on IRS rules and State of Oregon statutes regarding independent contractors. Payments to independent contractors are made through the accounts payable system, and therefore no tax withholdings or PERS payments are made. The City must report the payments made to independent contractors via the 1099 IRS reporting process.
 
"Employee" means an individual hired to perform services under the direction and control of the City as employer. Federal and State taxes, PERS contributions and other withholdings occur on an ongoing basis. Federal and state wage and hour laws apply to the relationship between the employee and the City as the employer.
 
"Professional, Technical, and Expert Services (PTE)" means an individual or group who for a fee provides services or gives professional advice regarding matters in the field of their special knowledge or training, including but not limited to: planners, architects, engineers, lawyers, accountants, doctors, dentists, ministers, and counselors in investments, insurance, advertising, graphics, training, public relations, communications, data processing, and management systems. The Purchasing Agent shall have authority to classify those services not specifically addressed in this provision.
 
"Assumed Business Name" means one or more words and/or numerals, that a person or entity uses to identify any business that the person or entity transacts, if the person does not conspicuously disclose the real and true name of each person who transacts the business.
 
"Model Contract" means an IC contract developed in advance to be used as a template for a number of ICs that are performing similar services under similar terms.

 
Scope of this Administrative Rule
  1. This rule covers services provided by individuals, partnerships or proprietorships, whether or not the party does business under an assumed business name.
  2. PTE services are exempt from this rule. PTE services are controlled under City Code 5.68. Refer questions to the Bureau of Purchases.
  3. Services provided by Corporations are exempt from this rule.
  4.  Individuals providing only materials are not covered by this rule.
  5. Services must cost less than $5,000 for all work performed. 
  6. Services costing more than $5,000 must follow the purchasing requirements in City Code 5.33.

 
Responsibility for Determination of Proper Status
  1. Prior to hiring an individual to perform services for the City as an IC, bureau staff should review the section "Criteria for IC status" and make an initial determination as to whether the individual qualifies for IC status. 
  2. Prior to establishing the IC as a vendor in the accounts payable system, Accounting Division staff will review and approve the bureau determination.
  3. If a conflict occurs, the City Attorney is the final arbiter as to IC status.
  4. If an individual does not qualify for IC status based upon the criteria in the section "Criteria for IC status", the bureaus must either hire the individual as an employee, or seek other vendors to provide the service.

 
Criteria for IC Status
If an individual meets all of the following criteria they can be treated as an independent contractor:
  • The individual or business entity providing the services is free from direction and control over the means and manner of providing the services, subject only to the right of the City to specify the desired results.
  • The individual or business entity providing services is responsible for obtaining all business registrations or professional occupation licenses required by state law or local government.
  • The individual or business entity providing the services furnishes the tools or equipment necessary for the performance of the services.
  • The individual or business entity providing services has the authority to hire and fire employees to perform the services.
  • The individual offers or can offer services to other clients outside the City of Portland.
  • Payment for the 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 Independent Contractor Worksheet, located with the Accounts Payable forms on the Accounting Division’s employee website, can assist bureau staff in determining if the arrangement with an individual meets the independent contractor guidelines.
Exceptions to the above requirements are to be approved by the City Attorney’s office.

 
Form Requirements for IC Contracts
  1. IC services are to be provided based on a written contract.
  2. IC contracts shall include a starting and ending date for providing the services.
  3. IC contracts shall include the scope of work, project manager, method of payments, and payment terms.
  4. IC contracts shall be consistent with the criteria listed in the section "Criteria for IC status" above.

 
Use of Model Contracts
  1. In order to increase administrative efficiency, bureaus that have many similar ICs may benefit from developing model contracts for each general type of activity. The blank model contract may then be completed with the specific information for each contractor.
  2. Model contracts must be approved in advance by the City Attorney’s office.

 
Requirements for Establishing IC Vendor Numbers
  1. Prior to establishing an IC vendor number, Accounting Division staff shall review the written contract and approve the vendor’s status as an IC. 
  2. Accounting Division staff will refer any questions regarding the IC status of a vendor to the City Attorney’s office for resolution.
  3. If the amount of the service is expected to exceed $2,500 in any fiscal year, the City requires all vendors and contractors to be EEO certified, per the requirements of City of Portland Code Chapter 3.100.

 
Payment Method
Request for payment shall be made by an invoice prepared by the independent contractor and approved by the project manager. Payments must be processed through the accounts payable system.

 
History
Resolution No. 36248, originally adopted by Council September 1, 2004.
Revised by Resolution No. 36435, adopted by Council September 6, 2006.