At UCSF, procuring services is a fundamental part of operations, but it differs significantly from purchasing tangible goods. In part five of our series on navigating service procurements, we are raising awareness of the need for compliance with employment policies that prioritize fairness and legal integrity.

We will touch on Covered Services, International Research Support Operations (IRSO), and ABC Test; and we’ll share some key practices, including managing Covered Services under Regents Policy 5402, reviewing International Independent Contractors, and applying the ABC test to determine worker classification. These policies support UCSF’s dedication to creating career positions while navigating tax implications and employment protections. 

Covered Services  

The UC is committed to bringing in‐house all Covered Services as defined by Regents Policy 5402: Regents Policy Generally Prohibiting Contracting for Services. As such, contracts that include Covered Services will only be allowed sparingly and will require demonstration that all other options to create career University of California (UC) positions have been exhausted. To move ahead you will need to contact Human Resources at [email protected] for exceptional approval. 

International Independent Contractors 

If your supplier is outside the United States or is not a US resident, they are considered an International Independent Contractor. These suppliers need to be reviewed by IRSO. Requests are reviewed for foreign located independent contractors for tax liability. This is done because there are tax implications and employment laws that need to be reviewed prior to hiring independent contractors located outside of the US and are non-US citizens. There is an IRSO form that must be utilized for this process. 

What Is The ABC Test?

The "ABC Test" is a legal framework used in California, and increasingly in other states, to determine if a worker is an employee or an independent contractor. It presumes employee status unless the hiring entity can prove the worker meets all three parts of the test. This test is crucial for determining eligibility for various benefits and protections, including minimum wage, overtime pay, and unemployment insurance. If the person meets all three criteria, they are classified as an independent contractor and eligible to work under a services contract. 

The Three Parts of the ABC Test: 

• Part A (Control): The worker is free from the control and direction of the UCSF—both under the contract and in practice.  
• Part B (Outside the Usual Course of Business): The worker performs work that is outside the usual course of the UCSF’s business.  
• Part C (Independently Established Business): The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for UCSF.  

If a hiring entity cannot prove all three parts of the test, the worker is considered an employee and is entitled to the protections afforded to employees under California law. 

Understanding and abiding by these key considerations will ensure that any work you have performed by a supplier is appropriate to outsource and complies with federal, state and local employment regulations. 

Stay tuned for more insights in upcoming articles. Please see the Related Information section below for more articles in the series.