 |
Home | Search | Browse | About IPO | Staff | Links |
|
Home | Search | Browse | About IPO | Staff | Links |
|
Contractual Service Providers by John Muno, CLP Independent contractual service providers, including umpires, computer wizards, equestrian experts, personal fitness trainers, financial advisors, tennis pros, black belts and bus drivers, are some of the everyday players in the field of public recreation and leisure services. Independent contractors such as these are embraced by many recreation agencies which recognize and seize the opportunity to enlarge their facilities and expand their own staff-led programs. As private recreation providers become more commonplace in the world of public recreation, the more essential it becomes for agencies to set guidelines governing these relationships. First, it is necessary to understand what an independent contractor is and why the distinction between an independent contractor and an employee is important. The differences between an employee and an independent contractor seem simple upon first glance, but under closer scrutiny are more complex. An employee can be defined as "a person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed. One who works for an employer; a person working for salary or wages." On the other hand, independent contractual service providers can be defined as "those who follow an independent trade, business or profession in which they offer their services to the public." However, whether to classify such people as employees or independent service contractors depends on several determining factors in each case. The basic standard used to identify independent contractor status is the "right-to-control" element. As a general rule of thumb, an individual is an independent contractor if the employer has the right to control or direct only the result of the work and not the means and methods of accomplishing the result. A simplified explanation of "right-to-control" can be made if you think of a doctor who removes your appendix. You have the right to control the result of his work—the removal of your appendix. But you have almost no right to control the details of the operation or how he achieves the result. Other fundamental comparisons helpful in determining employee or independent contractual service provider status can also be made: Employees routinely complete personnel/employment forms during the hiring process, while independent contractors typically sign a written contract developed by the agency to spell out the arrangements and requirements of the agreement. Employees are entitled to fringe benefit packages such as IMRF, medical and life insurance, and sick/vacation days. Independent contractors do not participate in fringe benefit plans offered by the agency. Employees are included in the agency's liability, unemployment and workers compensation insurance plans. Independent contractors are responsible for carrying their own insurance coverage. Employees are responsible income tax deductions (W-2 IRS form) each pay period, usually deducted automatically by the agency. Independent contractors are responsible for reporting their income received from the agency and are notified of the annual amount (through a 1099 IRS form). Employees generally are paid an hourly wage or salary and are included on the agency's payroll. Independent contractors often are paid a set amount per program or job or a portion or percentage of program registration fees. Customarily, these individuals or companies are paid as part of the agency's accounts payable system, rather than payroll. Recreation programs provided through such non-employees may include umpires/officials; exercise fitness programs; off-site programs at private recreation facilities (e.g. horseback riding, dog obedience, indoor ice skating and ski lessons); self-improvement/leisure interest (e.g. financial & investments/computer instruction); scuba instruction; bus trips/ transportation; karate; tennis instruction; and many others. Arrangements with independent recreation providers
should be made only after careful consideration of administrative, financial, insurance and legal ramifications. These are not inherently negative aspects, but they do require careful review. Legal Issues A written contract is essential. The contract should identify the basic guidelines and requirements to be fulfilled by both the agency and the independent contractual service provider. Enlisting the assistance of legal counsel is imperative in the development and periodic review of contractual agreements. "Many agencies currently utilize one or another form of contract, but several key components are identified as standards and should be included," says attorney Steve Adams, whose law firm James, Brooks, Adams and Tarulis represents a number of park districts and municipal governments in the Chicago area. In fact, Adams suggests that each agency should closely examine the status and working arrangements with every person or business responsible for providing instruction or supervision of their recreation programs. Some of the important aspects recommended to be included in a contract with an independent contractor are: • statement acknowledgment that the service provider has control of, and is responsible for, the means and methods of providing service; Insurance Requirements Insurance is a sometimes overlooked but always important component in the relationship between the agency and the independent service provider. "The bottom line is that independent service providers and not the agency are directly responsible for providing their own insurance policies for general liability and workers compensation coverage," says Robert Payseur, president of RCP Insurance Services, an insurance brokerage firm that represents park districts and other governmental organizations. The dollar amounts and insurance conditions to be secured by the independent service provider should be spelled out very clearly within the contract. It is helpful to provide a sample of a certificate of insurance to illustrate the exact coverage and dollar amounts. Insurance requirements call for the contractual service's insurance provider to name the agency as an additional insured to their policy. This gives greater liability protection to the agency at minimal expense to the service provider. The insurance representative should be consulted to advise on overall and specific facets of insurance. Other Considerations When Contracting Recreational Services It may be difficult for an agency to "control" communication and content of programs offered through independent contractors. Often a service provider's "contact" and on-site instructor are not the same person. This is especially true when programs are offered at a private facility. Administering, interpreting and implementing the contract and insurance requirements can be time consuming. These aspects can be simplified when a policy is developed with the assistance of the attorney and insurance representative. Finally, potential philosophical differences between the role of public recreation provider versus the profit motive of private enterprise must be addressed, and cost effectiveness issues must be resolved. Independent service providers generally earn a portion or percentage of program registration fees (similar to a "commission") as opposed to the district retaining a majority of registration fees and paying only direct program expenses. Contractual service arrangements frequently allow as much as 80% of registration fees to be paid to the service provider. In determining cost effectiveness of such programs, it is wise to take a hard look at all expenses—including indirect costs such as full-time supervisory costs and facility operating costs. A careful review might even lead the agency to conclude that their own employees could offer comparable services while generating substantially more revenue and income. Advantages Several advantages come to light when exploring the feasibility of contractual recreation services. The benefits can be significant. Programs can be expanded to include those that require specialized expertise or equipment, such as computer classes or scuba training. Also, specific services that are available only through private entrepreneurs can be offered, for example, celebrity sports camps or bus transportation for day trips. A major advantage is the ability to access facilities that your agency may not own and operate, including indoor ice skating rinks, horseback riding stables and bowling alleys. By offering programs and promoting business at these private sector facilities, an agency boosts the local economy and generates goodwill between public and private sectors. Both parties can benefit by becoming partners instead of competitors in the provision of leisure services. Contracting for recreation programs and services requires an agency to study complex issues, formulate precise guidelines and clearly communicate expectations. However, when balancing public demands for "more and better" services against shrinking funds and tax caps, these business relationships can be well worth the effort as a feasible, innovative way to expand programs, enhance services and stretch facility space. About the Author John Muno, CLP, is director of recreation at the Downers Grove Park District.
|
|
|