Guidelines for Consulting Agreements

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Guidelines for Consulting Agreements

Background

Agreements to secure the services of a consultant are established when the required services are for highly specialized advice or professional expertise, which cannot be performed satisfactorily by existing University personnel during the course of their assigned responsibilities.

Consultants are independent contractors and not employees or agents of the University. Current Cornell employees usually may not simultaneously serve as independent contractors under consulting agreements with the University.

Consulting agreements are contracts which bind both the consultant and the University. Like any contract, consulting agreements and any changes thereto require the signature of both parties.

The Independent Contractors Policy provides guidance regarding determination and procurement procedures as they relate to the purchase of outside personal services. For consulting under sponsored agreements, the Office of Sponsored Programs (OSP) evaluates independent contractor status, and once approved, establishes agreements and compliance with all applicable sponsor and University requirements. Independent contractor relationships supported under non-sponsored funds must first be approved by the University Controller's Office and once approved, should be contracted in accordance with University Purchasing Policy as stated in the Purchasing Manual.

Consulting vs. Employment

It is important to properly distinguish between consulting and employment relationships established on behalf of the University. By utilizing consulting agreements, the University can complete needed tasks that cannot be performed by current personnel without either the University's or the consultant's acquiring any additional responsibility or liability beyond that established in the contract. However, improper consulting arrangements that establish employment relationships under the guise of a contract impose on the University full employer responsibilities under the law, and may result in penalties for failure to fulfill such responsibilities.

The fundamental distinction between employment and consulting relationships, on which the Internal Revenue Service bases its enforcement of employers' withholding and reporting obligations is the degree to which a proposed service arrangement will allow control of the work effort, in terms of exactly what will be accomplished, when and how. It is important to note that such control is deemed to exist whether or not it is actually exercised. Merely having the right to exercise such control over the services is sufficient to render the University subject to all responsibilities and liabilities applicable to employment relationships.

If proposed consultants will perform services in the context of being in business for themselves, where they stand to realize a profit or suffer a loss as a result of their business activity, and where the consultants' and the University's obligations will be only as established in the contract, a consulting agreement is an appropriate, cost-effective way for obtaining the services on the University's behalf.

Exercise care when contemplating engaging outside services. The Internal Revenue Service requires withholding and payment of taxes, including Social Security Tax, where any element of an employer/employee relationship exists. Enforcement is strict and the University may be subject to significant penalties, including criminal action, for failing to properly distinguish consultants from employees. The Office of Sponsored Programs can provide further guidance regarding proper designation of services under sponsored agreements.

Procedure

To engage the services of a consultant under sponsored agreements, complete the "Request to Engage a Consultant" request through the Sponsored Portal and submit to OSP, along with the consultant's resume/curriculum vitae. Include the consultant's Social Security Number or Federal Identification Number on the request form as well as the period of performance for the consultant's services. The request should be signed by the Principal Investigator or other individual possessing appropriate signature authority.

Upon receipt and approval of the completed request OSP will generate a consulting agreement for submission to the consultant. Upon receipt of the agreement executed by the consultant, OSP will sign on behalf of Cornell and provide copies to the consultant and for internal distribution. Upon completion of the services or as prescribed in the agreement payment schedule, consultants will be directed to submit invoices to the responsible unit for review and approval. The responsible unit will determine whether the services have been performed in accordance with the consulting agreement, and forward an accounts payable voucher and any required documentation to the Controller's Office for payment.

Direct any questions during the course of a consultancy, including requests for cancellation or other agreement modifications, to your OSP Grant and Contract Officer.