This subject is covered in four parts. The first article provides an introduction and focuses on the classification for the purposes compliance with the Federal Labor Standards Act (FLSA) enforced by the U.S. Department of Labor (DOL). The second article focuses on the classification under the Internal Revenue Service (IRS). The third article covers the criteria used under Florida common law, and the fourth article addresses the criteria under the Florida Workers’ Compensation Statute.
In Florida, the classification of whether a worker is an employee or an independent contractor is based on factors laid out by common law and statute. For the purposes of determining workers’ compensation benefits, the Florida Worker’s Compensation Statute (Chapter 440, F.S.) applies. It provides a broad definition of employee, contains classification factors to identify when the worker is an independent contractor, and it provides exclusions from the definition of employee.
Definitions under the Florida Workers Compensation Statute
Under the Florida workers’ compensation statute, employers with a specific amount of employees (depending on the industry) are required to carry workers’ compensation insurance to cover lost wages and medical costs resulting from injuries sustained by employees at work.
The Florida Workers’ Compensation statute defines “employee” broadly. Among other definitions, an “employee” under the statute includes:
- Any person being paid for providing services under any appointment or contract for hire or apprenticeship, whether lawfully or unlawfully employed, including aliens and minors.
- Any officer of a corporation (such as presidents, vice-presidents, and other officers) paid for providing services to the corporation within the state. Corporate officers can reject workers’ compensation coverage by filing an exemption form with the state.
- A full time sole proprietor or a partner not engaged in the construction industry who elects to be an employee and files notice under the statute.
- For those engaged in construction industry:
- All subcontractors being paid by a construction contractor (unless they elected exemption under the statute), or who has otherwise secured the payment of compensation coverage for work performed by or as a subcontractor.
- An independent contractor
- A sole proprietor, partner, or partnership
Workers who are specifically excluded from the definition of employee under the statute include real estate agents, theatrical performers, horse farm exercise riders, taxi drivers, casual laborers, amateur sports officials, professional athletes and independent contractors not involved in the construction industry.
Under the statute, at least four of the following ten criteria must be met for a worker to be classified as an independent contractor:
- The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations;
- The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations;
- The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual;
- The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation;
- The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or
- The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists.
If four of the criteria listed above do not exist, an individual may still be presumed to be an independent contractor by satisfying any of the following conditions (considering the nature of the situation):
- The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work.
- The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform.
- The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform.
- The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis.
- The independent contractor may realize a profit or suffer a loss in connection with performing work or services.
- The independent contractor has continuing or recurring business liabilities or obligations.
- The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures.
Employers can benefit from the advice of legal counsel when deciding on employee classification for the purposes of workers’ compensation laws, which define “employee” in broader terms. Workers seeking to protect their benefits can consult with an attorney to better understand their rights and responsibilities in a work relationship, especially because some independent contractors are considered employees for the purposes of workers’ compensation benefits.
Whether you are an employer, employee, or independent contractor, the Orlando employment law attorneys of Burruezo & Burruezo can assist you in assessing an independent contractor vs. employee situation and offer competent legal representation, if necessary. Click here to contact an attorney now.