Does your company use “employees” or “independent contractors” to provide services? Simple question -- with a complex answer!
Risk - Misclassification of employees as independent contractors remains a primary focus of many government agencies, including the Internal Revenue Service. United States Department of Labor, Florida Department of Economic Opportunity Reemployment Assistance Programs, and Florida's Division of Workers' Compensation. Notably, many of these agencies created initiatives to join forces among these and other agencies to increase investigatory resources and enable broader enforcement of the laws they respectively enforce. Investigations by these agencies and related lawsuits can be uber-costly, extremely time-consuming, and even lead to personal liability and criminal penalties!
Reward - Utilization of independent contractors instead of employees can be very beneficial to businesses. For example, businesses may have more flexibility in terms of engagement and while avoiding payment or withholding of certain taxes, provision of workers' compensation insurance, and other potential liabilities or expenses related to use of employees.
Review - Do you want to try to tackle answering the question before the government agencies or courts impose their answers on you? Then, take a deep breath and dive into the guidance provided at the online link below. The guidance explains detailed federal and Florida tests that are used by these four agencies to properly classify service providers as independent contractors or employees. It also provides practical examples in which the tests can be applied. The guidance even includes information about other wage and hour complexities and pitfalls about which businesses should be aware to help avoid or mitigate potential liability.
Gail E. Farb is an attorney with Williams Parker. She focuses on labor and employment law, advising management clients regarding preventive measures in a wide variety of employment-related matters. Gail has significant experience defending single-plaintiff cases and collective actions in administrative, state, and federal court proceedings. She is a graduate of Emory University School of Law and Duke University.