Classifying workers correctly as employees or independent contractors ensures that businesses meet their regulatory compliance requirements under state and federal law. For example, correct classification ensures that companies have workers’ compensation coverage for employees, that they withhold and remit income and payroll taxes from employees’ paychecks, and that they pay the company’s payroll taxes and unemployment contributions for employees.
Misclassifying workers may lead to significant liability for Florida businesses due to violations of workers’ compensation, tax, and wage-and-hour laws.
Key Factors Used to Determine Employee vs. Independent Contractor Status
Various state and federal agencies use different tests to determine whether a worker qualifies as an employee or an independent contractor. The tests examine the degree of control that an employer may exercise over a worker and the worker’s degree of independence from the employer. The factors used in the employee vs. independent contractors analysis include:
- The extent of the employer’s control over the details of the work, including how the worker will do their work and what work the worker will do; an employer may dictate the results expected from an independent contractor’s work, but may not control the methods the independent contractor uses to accomplish their work
- Whether the worker performs their services as a distinct occupation or business separate from the employer’s business
- Whether the employer typically directs the work done by the worker
- The skill required for the occupation
- Whether the employer or worker supplies the equipment, vehicles, materials, tools, and workplace for the work done on behalf of the employer
- The length of time that the worker works for the employer
- The method of payment (e.g., by time, by job, weekly or monthly payments, etc.)
- Whether work performed forms an integral part of the employer’s business or the goods and services it sells to the public
What are Common Mistakes Florida Businesses Make When Classifying Workers
The most common mistakes that businesses make when classifying workers include:
- Assuming that having an independent contractor agreement determines the worker’s status, as government agencies will look at the details of the parties’ relationship rather than how they have termed their relationship
- Paying workers by 1099s without determining whether they qualify as independent contractors
- Overlooking the presumption in favor of classifying workers as employees
- Treating workers as independent contractors purely for financial savings, including avoiding payroll taxes, unemployment taxes, or workers’ compensation premiums
Steps Florida Businesses Can Take to Remain Compliant
Businesses that violate employment laws can find themselves in considerable legal and financial trouble. As such, it’s important that they remain compliant by:
- Conducting periodic audits of worker classifications, including reviewing job duties, pay structure, and supervision levels
- Using legally accurate independent contractor agreements for contractors, including avoiding contractual provisions that give the business excessive control over the means by which the contractor performs their work
- Maintaining detailed records, including contracts, invoices, and hour logs
- Utilizing a presumption in favor of classifying workers as employees, and only applying an independent contractor classification for workers who can meet the various factors
- Consulting a business lawyer with experience in the various state and federal agency tests for worker classifications
Contact Our Firm Today for Help with Your Company’s Compliance Obligations
Don’t make a worker classification mistake that could come back to haunt you. Instead, contact Brick Business Law, P.A. today for a free, confidential consultation with our Tampa business law attorneys to learn more about the rules for classifying workers as employees or independent contractors.
We can explain the best practices you can follow to comply with both state and federal laws.
