Whether a worker is an independent contractor or an employee impacts company expenses to employ the individual.
Additionally, a worker’s classification affects the individual’s rights in the workplace. Correctly classifying worker status is an essential element of Florida employment law.
Growing companies, particularly when they are starting out, often want to minimize their own labor expenses by engaging independent contractors. However, this can backfire, particularly if an independent contract is actually an employee for legal purposes.Florida Employment Attorney Kristi Benson
What Is the Difference Between an Independent Contractor and an Employee?
The Florida Department of Revenue aids in assessing employee or independent contractor classification. The following nine determining factors aid in the classification:
- The extent of control the business exercises over the work;
- Whether the employee engages in a distinct business;
- Whether completion of work is supervised or independent;
- The level of skill required;
- Whether the employer or the worker supplies equipment and tools;
- The length of employment;
- Whether the job is part of the regular business of the employer;
- Whether parties believe they are creating an employer/employee relationship; and
- Whether the hiring party is a business.
Another vital issue in classification questions is whether the individual is financially dependent on the company. An economically dependent individual is likely an employee. On the other hand, a financially independent individual is likely an independent contractor.
What Are the Rights of Employees vs. Independent Contractors in Florida?
An employee classification affords workers many federal protections. The Fair Labor Standards Act (FLSA) permits employees to earn federal minimum wage and overtime. Florida sets minimum wage at $8.56 per hour.
Federal youth employment standards outline the jobs and number of hours minors are permitted to work. Legally mandated benefits afforded to employees also include workers compensation, unemployment compensation, and military leave.
Additionally, the Family Medical and Leave Act (FMLA) applies to employees.
Employers are subject to record-keeping requirements for all employees.
What Are the Benefits of Hiring an Independent Contractor?
Hiring an individual as an independent contractor offers businesses multiple benefits.
There is a labor cost reduction in hiring independent contractors in Florida. Companies are not required to pay employment taxes or other benefits. These benefits include retirement, paid time off, workers’ compensation, or overtime pay. The avoidance of these expenses is beneficial for smaller companies with less profit.
Independent contractors provide more flexibility. Businesses typically hire independent contractors on a project basis. Therefore, independent contractors offer more flexibility to businesses. Businesses may scale up or scale down project needs based on customer demand. For example, if your business thrives on project-based production, an independent contractor may be a perfect choice.
Florida independent contractor rules dictate employers have considerably less control over independent contractors. The performance of independent contractors is typically result-based. A standard employee/employer relationship measures performance through everyday observation and monitoring.
Employers are not immediately responsible if an independent contractor is injured while working. Reduced liability exists for claims of wrongful termination, job discrimination, and sexual harassment. Employers may still be liable in certain circumstances as state and federal laws regulate these areas.
What Are the Benefits of Hiring an Employee?
The benefits of hiring an employee often outweigh the added expenses to your business.
Generally speaking, employees personally invest in your business. The relationship between an employer and employee may provide increased loyalty, productivity, and engagement. Less employee turnover results in less modifications to a company structure. There are more predictable salary and wage costs to a business.
Additionally, investments in training employees provide added benefits to business productivity and success.
In addition to the above points, employers exert more control over employees. Employers determine how, where, and when their employees perform their specified tasks. Increased control allows for uniformity in production and performance by all employees.
Further, employers control employee hours of work. For example, an employer may demand that all employees work from 9:00 a.m. to 5:00 p.m.
What Should I Include in My Florida Independent Contractor Agreement?
An independent contractor agreement in Florida can protect you and your business from potential lawsuits or liability. Defining terms of employment and expectations prevents confusion related to worker classification.
You can also use the agreement to support your classification of the worker if a dispute arises later. For example, imagine an independent contractor files for workers’ compensation by claiming they are your employee.
However, you have an agreement that outlines responsibilities typical of an independent contractor and states that the person is an independent contractor. You can use this agreement as evidence that the person is an independent contractor and defend against the workers’ comp claim.
An independent contractor agreement should include the following key points:
- Statement of relationship indicating the worker is an independent contractor;
- Project description outlining the independent contractor’s responsibilities;
- Payment and billing terms;
- Project timeline and deadlines; and
- Non-disclosure terms and confidentiality clauses.
Florida’s independent contractor rules do not require independent contractor agreements. However, clearly defining these terms in an independent contractor agreement helps both the contractor and client know what to expect.
What Are the Penalties for Misclassification of Independent Contractors?
Florida independent contractor laws charge strict penalties for misclassification of worker status. Unintentional misclassification does not prevent the imposition of penalties. According to the IRS, baseless misclassification of an employee as an independent contractor results in liability for employment taxes for the worker.
However, if a reasonable basis exists for the misclassification, relief exists from liability for employment taxes. Penalties include a $5,000 penalty for each misclassified employee. The IRS may also institute a penalty of 1.5% of the employee’s federal income tax liability and another 20% of the amount of Federal Insurance Constributions Act (FICA) tax that should have been withheld from the employee’s wages.
Intentional misclassifications result in penalty increases.
Classifying a worker as an employee or independent contractor is a challenging task. Correct classification of workers protects your business from unnecessary penalties and litigation. The attorneys at BrewerLong have extensive experience in the field of employment law. We work solely for employers. We proactively counsel clients to avoid unnecessary costs and litigation. Contact us for assistance on Florida independent contractor laws today.
This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.