Should I Classify my Worker as an Employee or an Independent Contractor?
It is important that employers correctly categorize their workers as either employees or independent contractors. Specifically, misclassification is not only a tax reporting issue, but also affects claims for reemployment assistance benefits. In Florida, whether a worker is an employee or an independent contractor depends mainly on the following 10 factors:
- The extent of control the business may exercise over the details of the work. This factor is the most important of the 10 factors. A worker is considered an employee where the employer retains the right to dictate how the work should be done or decides what work the worker will do and how he or she will do it. An independent contractor, on the other hand, is not subject to the will and control of the employer, who is normally interested only in the end result. Essentially, the employer can decide what results the independent contractor is to produce, but cannot control the methods the independent contractor will use to accomplish those results.
- Whether the person employed is engaged in a distinct occupation or business. When a person is engaged in a particular occupation or business that is separate and distinct from the employer’s business, he or she is more likely to be an independent contractor.
- Whether the work done in a certain locality is usually done under the direction of the employer or by a specialist without supervision. If the work is usually done under the direction of an employer, the worker is more likely to be an employee, as opposed to work usually done by a specialist without supervision, who would more likely be classified as an independent contractor.
- The skill required in the particular occupation. The greater the skill required for the occupation, the more likely the worker is an independent contractor. A contract for labor is typically considered an employment contract while the hiring of a licensed professional is more likely considered the hiring of an independent contractor.
- Whether the employer or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work. Independent contractors typically are expected to provide everything they need to do the job. Employees, however, are not expected to provide their own workplace, materials, tools, or supplies or to otherwise invest money in the business.
- The length of employment. Employment is usually a more long-term, continuous, and exclusive the relationship with the employer.
- The method of payment, whether by the time or by the job. Independent contractors usually perform their work one job at a time and are paid by the job, while employees are generally paid for their time.
- Whether the work is a part of the regular business of the employer. If certain services are so essential to a business that it will succeed or fail based on the quality of such services, the business often wants to exercise enough control so as to ascertain that the services are performed well. Thus, if the service provided by a worker is an integral part of the service the employer provides to the public, the worker is more likely to be an employee.
- Whether the parties believe they are creating the relationship of employer and employee. Generally, a written agreement between the parties describing their relationship should be honored, unless other provisions of the agreement or the actual practice of the parties show that the agreement is not a valid description of the working relationship. If the parties’ actual practice show an employee relationship, an agreement describing the worker as an independent contractor will be disregarded. Therefore, how the worker is treated, rather than the language of a written agreement or issuance of a 1099, determines whether he or she is an employee or independent contractor.
- Whether the hiring party is or is not in business. Where the hiring party is in business, the worker is more likely an employee. On the other hand, where the hiring party is an individual, the worker is more likely an independent contractor.