Independent Contractors vs. Employees in the State of Florida
What is the difference between an employee and an independent contractor?
While there are many differences between independent contractors and employees, perhaps the most obvious one is that an employer does not have the right to control or direct the means or method of accomplishing the work results, only the result of the work itself. In other words, the right to control is a critical element when determining whether the employee is an independent contractor or an employee.
During peak business periods, to perform services which are not a part of an employer’s regular business or to work on a special assignment, employers may turn to independent contractors to fill those roles. Independent contractors are responsible for their own taxes,therefore employers are not required to pay employment taxes or to withhold state, federal or local taxes from paychecks to independent contractors. Independent contractors are not entitled to benefits from the company, such as health insurance or retirement, and are ineligible for unemployment benefits. Independent contractors are even exempt from employment discrimination laws governing wages and hours worked. While hiring independent contractors is certainly beneficial from the employer’s point of view, problems can arise when workers who are actually employees are treated as independent contractors by their employers.
While there are many differences between independent contractors and employees, perhaps the most obvious one is that an employer does not have the right to control or direct the means or method of accomplishing the work results, only the result of the work itself. In other words, the right to control is a critical element when determining whether the employee is an independent contractor or an employee. That control can effectively be split into three areas:
- Financial control
- Behavioral control
- The type of relationship which exists between the employer and the worker.
While these are very general areas of distinction, the IRS further breaks down the differences between independent contractors and employees, by using different criteria, with an underlying theme of “who sets the rules of work”. These include:
- The employer will generally provide no training for an independent contractor as they would do for an employee. An employee will have training for the job they are performing, while an independent contractor will come into the job with the necessary skills. As an example, if an employer hires an independent contractor to paint the interior of an office building, it is assumed the person has painting skills, however if a painting company hires an employee to paint, that person will be trained to perform the job of painting.
- In the same way, employees usually are must adhere to instructions regarding
where, when and how they are to complete specific job duties. An independent contractor sets his or her own hours, may work from home or other locations (depending on the job) and determines how to complete the specific jobs.
- If the worker’s services are integrated into the operations of the business, then the direction and control by the employer exists—i.e., all jobs of employees in a business are integrated into the business operations as a whole.
- An employee renders his or her services personally, and in a manner approved by the employer (the method used by the employee to accomplish the work, as well as the results of the method used to accomplish the work are approved by the employer).
- If the employer is in charge of hiring, supervising and paying those who work for him or her, then that shows the employer has control over employees. If a worker hires, supervises and pays other assistants, pursuant to a contract under which labor and materials are provided, and the only responsibility that worker has, is to complete a specific job, then he or she is probably an independent contractor.
- An employer has a continuing relationship with an employee, while the employer’s relationship with an independent contractor is limited to a specific time frame. This is not to say that the independent contractor may not perform a specific job for the employer, say, yearly or even once every six months, but there is no ongoing relationship such as the daily one between an employer and employee.
- Employees usually have set work hours—i.e., they show up at 9:00 a.m. and leave at 5:00 p.m., Monday through Friday. An independent contractor sets his or her own hours, and the only criteria is that the job the independent contractor is being paid to do is completed within a set time frame.
- An employee devotes his or her full work-time to one employer, while an independent contractor can work for several different people at the same time. As an example, an independent contractor who performs web design for businesses, could be designing websites for several different clients at any given moment. An independent contractor can take any work he or she wants, at any time, while the employee works solely for one employer.
- Employees typically perform their work on their employer’s premises, showing a degree of control over the employee by the employer. The independent contractor may perform his or her job on the premises, or could perform the job somewhere else—his or her home, or any number of other locations. It is important to note, however, that in this age of telecommuters, this factor, in and of itself, does not denote an independent contractor. In order to determine whether a person who performs his or her job from home is an employee or independent contractor, it would be necessary to factor in the other issues listed.
- An employee usually has the order and sequence of his or her job duties set by the employer, while an independent contractor can follow his or her own pattern of work.
- An employee of a company may be required to submit regular reports, whether oral or written, to his or her employer, while an independent contractor is rarely required to submit such regular reports.
- A worker who is paid by the hour, week or month, is usually considered a regular employee, while a person who is paid by the job is more likely to be an independent contractor.
- A worker who is paid business and/or traveling expenses is probably an employee, while an independent contractor is responsible for his or her own business and/or traveling expenses, and generally factors these expenses into the total amount charged to the employer.
- While an independent contractor usually provides his or her own tools and materials, an employee usually uses his employer’s tools and materials to complete a job.
- An independent contractor may have work facilities which are not maintained by employees, to perform his or her work or services in. An employee is unlikely to have an investment in facilities, rather are required to help maintain his or her employer’s facilities. As an example, an independent contractor may have a shop, or a home office, which he or she takes care of.
So, an employee is any worker who performs services for his or her employer, when that employer has the right to direct and control the work. Even if the employer allows an employee freedom to perform certain services, if the employer has the right to control the details of how the services are performed, then the worker is an employee. If the employer does not have the right to control the details of how the services are performed, then the worker is probably an independent contractor.
What if the Worker Signs a Contract Stating He or She is an Independent Contractor?
Some employers attempt to circumvent the rules applying to employees and independent contractors by having an employee sign a contract which states he or she is an independent contractor. Such a contract will not get the employer off the hook if the status of the employee is questioned. In other words, the mere existence of such a contract does not mean a worker is not an employee—all the factors must be reviewed to make that determination.
Many employers want to classify workers as independent contractors simply because it saves them money they would have to spend on employee taxes and other benefits. Some employers even enter into a specific contract with their employee to perform work which is outside the scope of their regular responsibilities, in an attempt to avoid classifying the worker as an employee, and avoid paying taxes and benefits. If the worker is generally under the control of the employer, such avoidance tactics would not be sufficient to classify the worker as an independent contractor.
FSLA and Supreme Court Rules
Under FSLA (Fair Labor Standards Act), an employment relationship should be distinguished from a contractual relationship. An employee is dependent on the business he or she works for—the FSLA calls this an “economic reality.” The U.S. Supreme Court has indicated more than once that no single rule or test determines whether a worker is an employee or an independent contractor, rather the work situation must be taken as a whole. The Supreme Court considers:
- The permanency of the relationship
- The alleged contractor’s investment in equipment and facilities
- The degree of control by the employer
- The alleged independent contractor’s opportunities for profit and loss
- The extent to which the services rendered by the employee or independent contractor are an integral part of the employer’s business
- The employee or independent contractor’s degree of independent business operation and organization
- The amount of initiative required by the worker for success
While the place the work is performed can be factor, it is not always a factor. By the same token, whether an alleged independent contractor is licensed to perform the work in question is also not necessarily a factor. The Supreme Court has even found that the timing or mode of payment does not necessarily control whether a worker is an employee or an independent contractor.
Pay Requirements for Employees
Employees are required, under the law, to be paid at least Federal minimum wage, as well as overtime pay. An independent contractor has no such requirements, and usually works for a set price per job, although this can vary, depending on the work performed. The construction trades industries are typically full of employees who are wrongly classified as independent contractors, as are workers in the following industries:
- Workers for delivery services
- Workers for courier services
- Workers on maintenance crews
- Servers in restaurants
- Workers in nail salons
- Workers in food processing plants
- Stocking vendor workers
Florida Laws on Independent Contractors
Florida law weighs essentially the same factors as the IRS, specifically, the level of control the employer has over the worker. This level of control is different from the FLSA “economic realities” standard which evaluates the level of economic dependence of the worker on his or her employer. Florida law considers the following:
- The skills necessary in any specific occupation
- If the worker has a specific business or occupation
- The extent of control exercised by the business and the employer regarding the details of the work performed
- Whether the work performed is generally performed under an employer’s direction or whether the work performed is done by a person considered a specialist, and without supervision
- Whether tools and instruments necessary to perform the job is supplied by the worker or by the employer
- The amount of time the worker is employed
- The manner in which the worker is paid—by the job or by time
- Whether the work performed by the worker is a part of the employer’s regular business
- What both parties believe their work relationship is
It is important to note that some workers have special rules which do not really fall under the laws for independent contractors vs. employees. These include emergency workers, workers for elections, elected and public officials, and medical residents. There is no “set” numbers of factors which deem a worker an independent contractor or an employee, and factors which are relevant in one situation may not be relevant in another. The overall relationship must be carefully looked at to determine whether a worker is being misclassified. Workers who believe they are employees, but are being misclassified as independent contractors, should speak to an employment attorney as soon as possible.
Employers should also definitely consult an Ayo and Iken attorney who can correctly identify any vulnerabilities which may exist regarding worker classifications, as misclassification can cause serious problems for the employer.
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