SECTION OVERVIEW AND POLICIES

This section provides guidance about:

• Determining employee status when making a payment to an individual who provided services to the State.
• Paying non-employee travel
• Paying expenses for employment interviews
• Paying expenses of non-salaried Public Officers

DETERMINING EMPLOYEE STATUS

Policy Statement:

State agencies must appropriately classify workers as either employees or independent contractors so the workers are properly taxed. The Internal Revenue Service’s (IRS) Federal-State Reference Guide provides state government employers with guidance on determining worker status.

Process and Document Preparation:

PROCESSING NON-EMPLOYEE PAYMENTS

Prior to procuring services, the Business Unit must determine whether the worker is an employee or an independent contractor. Misclassifying a worker as an independent contractor, rather than an employee, disadvantages the worker in that:

• For income tax purposes, the worker may be required to report payments received for his or her services as a self-employed individual, which will result in payment of more than his or her proper share of Social Security and Medicare tax liabilities.
• The worker will not receive pension plan benefits.
• The worker will not receive other employee-entitled fringe benefits (e.g., union, health insurance, deferred compensation).

In addition, misclassifying a worker as an independent contractor may subject the State to liability with the IRS for unpaid employment taxes, interest and penalties. Adhering to the Guidelines to Determine Employee Status below can minimize the risk of exposure to an IRS audit, and resulting financial penalties to New York State if the IRS determines a worker has been misclassified as an independent contractor.

Conversely, misclassifying an independent contractor as an employee may result in providing benefits of employment (such as health insurance and pension benefits) to an individual who is not entitled to them.

GUIDELINES TO DETERMINE EMPLOYEE STATUS

The attachments referenced below provide guidance in making worker status determinations and documenting the procedures used in accordance with IRS criteria. If there are no material differences in the factual circumstances that apply to a group of similarly situated workers, then Business Units may make and document one worker status determination for the group of workers as a whole, rather than make an individual determination for each worker.

Attachment A – IRS guidelines for determining whether a worker is an employee or an independent contractor.

https://www.osc.state.ny.us/files/state-agencies/pdf/xii-6-I-a-att.pdf

Attachment B – Employee/Independent Contractor Status Determination Worksheet to use in conjunction with Attachments A and C. This worksheet may be used “as is” or as a template to create a determination form specific to the Business Unit’s needs.

https://www.osc.state.ny.us/files/state-agencies/pdf/xii-6-I-b-att.pdf

Note: In lieu of using this worksheet, the Business Unit may request that the IRS determine the worker’s classification by filing IRS Form SS-8.

Attachment C – IRS Publication 963, Chapter 4, provides additional information and examples illustrating worker classification.

https://www.osc.state.ny.us/files/state-agencies/pdf/xii-6-I-c-att.pdf

BUSINESS UNIT RESPONSIBILITIES

1. Business Units are responsible for ensuring individuals they pay qualify as independent contractors.
2. Business Units are responsible for developing and maintaining adequate documentation to support individuals paid qualify as independent contractors. The rationale justifying this determination may be required before a claim will be paid. If the actual facts of the situation establish that an employer/employee relationship exists, the individual will be treated as an employee even though the Business Unit may have entered into a contract. The Business Unit will process these payments through the Employee Expense Reimbursement Module in the Statewide Financial System (SFS), regardless of whether the Business Unit is an Online or Bulkload user.
3. If payment for services to be rendered by an independent contractor will exceed the Business Unit’s discretionary spending level, the Business Unit should enter into a contract and submit the contract to the Office of the State Comptroller (OSC) for review and approval prior to payment.
4. Contracts are not necessary in certain cases where payment is based on a statewide approved fee schedule (e.g., medical fee schedule). When a contract is not feasible or practical because of special circumstances, the Business Unit should obtain written approval by OSC’s Bureau of Contracts.
5. Prior to making a payment to an individual through the Accounts Payable Module in the SFS, Business Units are responsible for establishing whether the individual is, or has been, on the payroll of the State at any time during the current calendar year. The State encompasses any department, board, commission, etc., that has its payroll processed by OSC. The legislature, its commissions, and the judiciary are included as the State.

Generally, if an individual is an employee of the State and provides services to another department, board, etc. of the State, the person must be paid for these services as an employee.

EXCEPTIONS

The provisions regarding individuals who provide services do not govern payments to employees who provide a product or lease property or equipment to the State. Business Units should make these payments using the Accounts Payable Module in the SFS. Business Units should be aware of the (i) appearance of conflict of interest in dealing with State employees who provide goods/services or who lease property or equipment and (ii) the required Public Officer Laws that govern procurements with State employees.

Paying Non-Employee Travel

Policy References:

Non-employee travel is claimed through the Accounts Payable Module. In some circumstances, non-employees may be entitled to the reimbursement of travel expenses if allowed by the terms and conditions of agreements entered into by State agencies. In these circumstances, the contract must define whether travel is reimbursed following the State’s travel rules or whether other rules govern the travel reimbursement. If the reimbursement follows the State’s travel rules, please refer to the applicable sections of Chapter XIII, Section 4 - Employee Travel Expense Reimbursement. If the reimbursement follows other rules, those rules should be stated in the contract.

Process and Document Preparation:

When requesting the reimbursement of travel expenses the vendor/non-employee should complete the AC 3257-S Claim for Travel Reimbursement by a Non-Employee, including the vendor certification section. The funding Business Unit should then complete AC 3253-S Claim for Payment and attach the AC 3257-S Claim for Reimbursement by a Non-Employee to it. The Business Unit must maintain these forms in accordance with the record retention requirements outlined in Section 3 - Record Retention - Accounts Payable Vouchers and Land Claims of this Chapter.

The payment should be made using the appropriate Vendor ID. If it is part of a contract payment, the vendor is the contractor.

Paying Expenses for Employment Interviews

Policy References:

Employment interview expenses of non-State employees are claimed through the Accounts Payable Module. The appointing officer of an agency may authorize reimbursement for travel expenses necessary and incurred by candidates attending interviews for positions for which there is a shortage of qualified candidates. Positions in the competitive class for which there are shortages of qualified candidates shall be determined by the State Department of Civil Service; for positions outside the competitive class, such determination shall be made by the head of the agency in which the positions are authorized. Reimbursement for non-employees may be allowed if the candidate resides over 50 miles from the place of interview in accordance with the rules detailed in Chapter XIII, Section 4 - Employee Expense Reimbursement. Expenses may include transportation, food, and lodging.

Process and Document Preparation:

In order to detail allowable expenses, non-employees must fill out the AC 3257-S Claim for Travel Reimbursement by a Non-Employee, including the vendor certification section. This document must be maintained by the Business Unit. In order to process these payments, the AC 3253-S Claim for Payment form must be completed and maintained by the funding Business Unit in accordance with the record retention requirements outlined in Section 3 - Record Retention - Accounts Payable Vouchers and Land Claims of this Chapter.

Non-employee payments for interview expenses should be processed using the appropriate Vendor ID.

Paying Non-Salaried Public Officers

Policy References:

Non-salaried Public Officers expenses are claimed through the Accounts Payable Module. Non-salaried public officers are members of boards, commissions, advisory councils, etc., established by law who serve without salary. They are entitled to reimbursement of actual expenses incurred in the performance of their official duties. For overnight travel, non-salaried Public Officers may receive a fixed per diem allowance of $75 per night, or may use the receipted (Method 2) reimbursement rates described in Chapter XIII, Section 7 - Office of the State Comptroller Travel Manual.

The fixed per diem rate (as opposed to the receipted rates set forth in Method 2) provides for a flat rate allowance for meals, lodging and incidental expenses regardless of where lodging is obtained, including lodging with relatives or friends. No receipts are required when using the fixed per diem rates.

Non-salaried Public Officers may not combine the use of the fixed per diem rates and the receipted rates on the same overnight trip.

DAY TRIP REIMBURSEMENT

When a non-salaried Public Officer is traveling for a significant portion of a day with no overnight stay, the official is eligible for a $25 per diem allowance to cover meals and incidental expenses. Public Officers with meal receipts can be reimbursed up to the maximum amount of the meal per diem allowance specified for the particular area of travel, but cannot mix the two methods in one overnight trip.

Process and Document Preparation:

In order to process these payments, an AC 3253-S Claim for Payment form must be completed. Business Units should process these payments with the appropriate Vendor ID.

In order to detail allowable expenses, Public Officers must fill out the form titled AC 3257-S Claim for Travel Reimbursement by a Non-Employee, including the vendor certification section, and submit it for the Business Unit to maintain in accordance with record retention requirements outlined in Section 3 - Record Retention - Accounts Payable Vouchers and Land Claims of this Chapter. The funding Business Unit should attach the AC 3257-S Claim for Travel Reimbursement by a Non-Employee form to the form titled AC 3253-S Claim for Payment.

Guide to Financial Operations

REV. 12/08/2014