Most businesses require workforce support to function. Depending on your industry, you may require a few or several people to perform tasks for your enterprise. Often these workers will be your employees. However, you may also need the services of independent contractors. Both types of workers can be essential to a business’s operations. However, as an employer, you will have different responsibilities and obligations for an employee vs. an independent contractor. Therefore, if you have a Florida business, it’s vital to know the difference between these two types of workers. What is the difference between an employee and an independent contractor?
The Difference Between an Employee and an Independent Contractor
It seems like you could easily tell an employee from an independent contractor. However, it’s not always clear which role a person has in a business setting. The primary difference between an independent contractor and an employee in control. An employer has the right to control or direct the work an employee performs. An independent contractor will complete a task or job in the manner they choose without being controlled by the person for whom they are completing their work.
IRS Categories: Control v. Independence
The IRS uses certain types of evidence to determine an employer’s degree of control. According to the agency, the facts that can establish control v. independence will come from three categories:
- Behavioral: Does the business control or have the right to control how a worker does their job and what they do?
- Financial: Does the business control the business aspects of the relationship? This may include facts such as how a worker is paid, if they are reimbursed for their expenses, and who provides the tools and supplies needed to complete the job.
- Type of Relationship: This inquiry focuses on how the two parties act towards one another. Do they have a written contract? Does the business owner provide employee-like benefits to the worker? Is this relationship going to continue? Is the work that is being performed central to the business?
The IRS examines the overall relationship and how much control the business owner has to direct and control the worker. Each relationship and business are different, and there is not a set number of factors that make someone an employee or independent contractor. Therefore, business owners should examine all three of these areas.
Florida Common Law Factors
In Florida, employers generally look to multiple common law factors to determine whether someone is an employee or an independent contractor. Here are some of the factors that may be considered:
- The extent of control the business may exercise over the details of the work,
- Whether the employer retains the right to say how the work should be done or what work they will do, or if the hiring party is only interested in the final product or end result,
- Whether the worker is subject to the will of the employer,
- Whether the paying party can decide on the result of the work but not the methods used to accomplish those results,
- Whether the employed person is in a distinct occupation or business,
- Whether the work done is in a specific locality under an employer’s direction or by an unsupervised specialist,
- The skills the particular occupation requires,
- Whether the paying party or the worker supplies the necessary tools to complete the job and the place of work for the person completing the labor,
- How long the person is “employed,”
- How the person is paid. If their payment is made by the time or by the job,
- Whether the work completed is a regular part of the paying party’s business,
- Whether the parties believe they are creating an employee/employer relationship,
- If there is a written agreement that describes the relationship,
- How the relationship actually functions,
- How the worker is treated by the paying party, and
- Whether the paying party operates a business,
Florida’s common law factors are similar to the IRS. However, the two operate under different laws and contain distinct information. Just as with the IRS areas, there is no specific number of Florida factors that will make someone an employee or independent contractor.
Employment Status by Agreement
Sometimes, employers will attempt to create an independent contractor relationship. They may do this by having their employees sign a contract saying they are independent contractors. However, calling someone, an independent contractor does not automatically create this designation. This is true even when the parties have a written agreement. If an employer misclassifies an employee as an independent contractor, there can be significant tax and other consequences.
Knowing the difference between an independent contractor and an employee is essential to a Florida business owner. If you have concerns regarding the status of your workforce, you should contact an experienced Florida business attorney. Your lawyer can help you assess your workforce needs and determine the best solutions for your business.
Contact an Experienced Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.