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THE BLACK HOLE

A case for principal investigators as independent contractors

By JONATHAN THON | NOV 25 2013

In my previous blog post, I highlighted the fact that despite their academic laurels, publically funded research institutes are no less aware of their bottom line and profit margins, and no less risk-averse, than private businesses. The problem is that while research departments are run like corporations, few principal investigators see themselves as small business owners. The result is a clear lack of push-back from academic faculty against institutional policies that ultimately take advantage of the basic research lab.

This is particularly evident within medical departments in the United States, where principal research scientists are expected to bring in 100% of their own salary and laboratory support, generally through a combination of federal/private grants and industry sponsorship. Infrastructure support (rent, administration, animal facilities, gas, power… etc.) is subtracted from this income and the remainder is used to support wages, accompanying fringe benefits (e.g., healthcare, dental coverage), equipment, reagents, and conference travel.

While departments will, on some occasions, provide a “start-up package” on hire, these front-end investments are generally designed to expedite laboratory setup and are usually recovered from the indirect costs over the following five years. Nevertheless, academic faculty remain university/hospital “employees” and capital raised by the principal investigator is funneled directly to the institution, which then sets up a laboratory account and sundry fund from which it pays investigator salaries and related expenses.

Academic faculty have limited input regarding institutionally determined indirect costs, salary caps and, in the case of larger institutions such as the Partners-affiliated hospitals in Boston, purchasing decisions – which are dictated by preferred vendor contracts. Although employment contracts are meant to provide job security in exchange for surrendering administrative freedom, principal investigators are still required to pay themselves, insofar as salary is determined entirely on capital raised by the investigator from outside sources, and benefits packages are tied directly to incoming grants.

Universities and hospitals continue to trend toward fewer tenured faculty (awarded lifetime employment of accomplished senior faculty) and more research scientist positions (short-term contract employment) that remove the burden of salary support from the institution entirely. As universities and hospitals distance themselves from assuming the financial burden of supporting to a major extent their basic research programs, it is important that principal investigators be reclassified as what they are: independent contractors.

Without question, principal investigators in academic settings presently occupy an independent profession in which they offer their services to the general public. Under the Internal Revenue Service’s definition of “independent contractors” in the U.S., the “payer” has the right to control only the result of the work, and not what will be done or how it will be done. Indeed, it is unclear that the research institution can even be defined as the payer, in the common case that the lab is sustained almost entirely on external grants and the supported projects are selected by the funding agency.

What matters, according to the IRS’s litmus test of what distinguishes an employee from an independent contractor, is that the employer has the legal right to control the details of how the services are performed – which, in a basic research practice at an academic institution is almost certainly not the case. By comparison, the principal investigator in an academic lab has absolute control of how research is performed by students, technicians and post-doctoral fellows in his/her lab. These researchers, while also commonly funded through the principal investigator’s operating grants, are appropriately regarded as employees of the principal investigator. Canada Revenue Agency definitions of independent contractors in Canada are similar, and this argument can be extended just as easily to Canadian institutions moving away from salary-supported faculty positions.

There are, of course, major disadvantages to re-classifying principal investigators as independent contractors – tax exemptions and health insurance being chief amongst them. Nevertheless, it behooves us to rethink how research scientists are currently employed and funded at universities to more accurately reflect the role academic institutions are meant to play in society and better align academic department’s administrative structure with their underlying mission.

Thoughts?

ABOUT JONATHAN THON
Jonathan Thon
Dr. Thon is an assistant professor in the hematology division at Brigham and Women’s Hospital, and Harvard Medical School in Boston.
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  1. Philip Hultin / November 27, 2013 at 2:59 pm

    This is perhaps a workable model in a relatively funding-rich field like medicine, in a wealthy country like the USA. It would be devastating to academics in most other situations however.
    First of all, private-contractor researchers would presumably do no teaching. There is great merit in the idea of the teacher-scholar: as a role model; as someone who brings the latest thinking to the classroom; and because teaching often informs research. Do we want universities in which undergraduates are taught exclusively by teaching-only faculty on low-paid sessional contracts? That’s what we would get from the model you propose here.
    Secondly, and perhaps obviously, the only research that could be done in a contractor model would be flavour-of-the-month fundable research. If the only people doing research are paid exclusively from their own grants, guess what – they only do work that appeals to the granting agencies. Maybe not a problem if you are a cancer researcher, but if you are a basic scientist or (god forbid) a humanities or social science scholar, you are out of luck.
    I hope we can avoid selling our universities out in the way you propose, at least until I retire.

  2. Jonathan Thon / November 27, 2013 at 7:03 pm

    I agree, and while there is absolutely great merit in the idea of the teacher-scholar, few of us are great at both and teaching only faculty are worth significantly more than their sessional contracts presently suggest.

    There is also a strong case to be made that under the present funding model much of the research that is being done is flavour-of-the-month fundable research, as most research scientists already rely almost exclusively on external funding to support their research programs.

    Both topics warrant further exploration, since, as Philip correctly points out, they are intimately related to the sometimes conflicting mission of research universities to function both as centers of higher education while maintaining competitive research programs.

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