Hiring independent contractors, consultants, or freelancers instead of employees can save you time, money, and paperwork. However, if you treat an independent contractor like an employee, you open yourself up to claims under the Fair Labor Standards Act (FLSA), the Internal Revenue Service may issue penalties, and if intellectual property is created, you may run into ownership challenges.
Many employers try to save money on taxes and escape liability under employment laws by asking employees to sign Independent Contractor Agreements. Unfortunately, many people labeled as independent contractors are really employees under Florida Employment law and the Federal Fair Labor Standards act. Even an agreement between the parties that the employee is an independent contractor might not hold up to a legal challenge. In the case of a business utilizing dozens or hundreds of employees, the result could be millions of dollars in damages.
The landscape has changed drastically in the last few years. The IRS takes a particularly dim view of employees misclassified as contractors. They now have a form an employee can submit if he believes he has been misclassified by his employer. Misclassification has become a hot spot for legal action in the last few years, and both employers, and employees, at risk should speak with us right away.
Employees who believe that they have been misclassified have many options even if the employee signed an agreement stating he is an independent contractor. As far as the law is concerned, an employee mere stating that they are an independent contractor doesn’t necessarily make it so. In addition, if an employee is fired for objecting to being misclassified, he may be protected from retaliation, and entitled to damages, as a whistleblower.
In determining if a person is an employee or independent contractor the court will consider a number of factors and apply a balancing test. Factors include but are not limited to:
Control of the person. Control means what the person does, and how he does it. A person is likely an employee when an employer controls the time, place or manner of the work. This means if an employer track hours, requires office time, requires permission for time off, or acts in a supervisory position, the person is likely an employee and not an independent contractors.
Provision of equipment and supplies. Does the employer provide the equipment or instruct or supervise in its use? Does the employer dictate where to buy equipment and supplies? Do they provide a desk, computer or tools? If so, that’s a good indication that the person is an employee. Independent contractors generally use their own equipment and supplies.
Are Co-workers or Assistants provided? If a person is told who will assist them and does not have the ability to hire or his own help, then he may be an employee. Independent contractors general hire their own workers or assistants. They may also choose to work alone.
Are there evaluations? When a person is evaluated in regard to the process, details or methods of the work as the work progresses, he may be an employee. An independent contractor is evaluated on result of the end product, not the procedures used.
Is training provided training. When a company provides training on the manner in which a job should be performed nd the specific procedures to be used, it is a good indication that he is an employee. Training for independent contractors should be minimal instruction on the overall results required, not on the manner in which the job should be performed process.
Who has financial control? Employers generally reimburse expenses, while contractors generally provide a price and then pay for their own supplies or equipment. In regard to pay frequency, employees are generally paid by the hour, day or week in regular intervals. Contractors are more frequently paid by the job. Finally, a contractor will have greater opportunity to make a profit or take a loss than an employee.
Does the Person have the opportunity to work elsewhere? Independent contractors are free to take work from other companies. Employees are usually required to work exclusively for a single employer only.
Are benefits outside pay provided? If the employer provides insurance, sick days, vacation time, pension or other benefits, then the person is likely an employee.
Is there a term, or definite end to the job? When a person is hired for an indefinite period of time, as opposed to working on a specific project or series of projects, then he is likely to be considered an employee.
No single factor that will determine if a person is an employee. Civil regulatory agencies and courts will weigh all these factors and others and arrive at a conclusion based upon the “Totality of the Circumstances.”
Unfortunately, many employers read these facts and argue the case in their head, going item by item to arrive at conclusions in their favor. It’s a wonderful fiction that might provide a night’s rest, but case law may have already decided your circumstance against you. You unfortunately won’t find this out until you get to court, or an employee or civil agency has you formally served.
Does all this sound a bit daunting?
Our South Florida employment attorneys serve clients in Palm Beach County, Broward County, Miami Dade County, and throughout Florida.
Our employment lawyers in Florida can assist you in claims and defenses in the area of employment law. We can advise, counsel, designing and draft employment agreements and independent contractor agreements for use in businesses that give independent contractors and business owners the confidence of legal compliance.
We can protect your business by providing zealous representation with Fair Labor Standards Act defenses and Department of Labor Civil Action defenses. We also represent employees in claims against business owners for compensation for violations of the Fair labor Standards Act FLSA.
Do you have questions or concerns? We can help. Call now.
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