The Importance of Properly Classifying Independent Contractors

August 1, 2019

I.             Employer/Employee Relationships

The federal government allows for many different types of employer/employee type relationships. By “employer/employee type relationship,” I mean one person completes a task or service for someone else or on the behalf of someone else and receives compensation for it. Florida has four main types and additional subcategories. A contract employee is an actual employee whose terms of employment are strictly governed by the terms of the contract. This article is not about those types of employees. Another type of employer/employee type of relationship is the service provider. This one is usually confusing to some because some of the examples given can also fall into the category of regular at-will employee, independent contractor, or contract employee. A distinguishing is based on who directly compensates the service provider. If the compensation provided by the employer is given directly to the service provider and not retained as full compensation by the individual; given to a third party; or provided by someone else, then they are probably properly categorized as a service provider. An example would be a plumber who works for roto-rooter. The largest numbers of employees in Florida are best defined as at-will employees. At-will employees are best defined by their ability to begin or end their employment by both the employer and employee.  An at-will employee has the right to quit a job anytime they like for whatever reason they like with near impunity. It may affect your ability to receive unemployment benefits. Other than that, there are no other governmental concerns. Likewise, the employer can terminate the employee’s employment for any reason other than an unlawful reason. They also have unemployment compensation concerns. Finally there is the independent contractor. Independent contractors fall into a separate category altogether. We are going to take a look at some of the distinguishing characteristics of independent contractors and the pros and cons for both the employer and the individual.

II.           Independent Contractor Defined

You could search the definition of independent contractor on the internet and usually come across a fairly consistent summary. In general, “People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.” This is a generalization that must be evaluated based on the guidance provided by the Internal Revenue Service and Florida case law. For each of the examples provided, you can find where the term “independent contractor” does not apply. It all depends on the relationship between the parties. You can visit the IRS website at https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee for more information.

Florida case law has also weighed in on proper classification of the employer/employee relationship. In Villazon v. Prudential Health Care Plan, 843 So. 2d 842, 844 (Fla. 2003), the court clarified that “"Independent contractor" is a term which is antithetical to the word "servant," although not to the word "agent." In fact, most of the persons known as agents, that is, brokers, factors, attorneys, collection agencies, and selling agencies are independent contractors since they are contractors but, although employed to perform services, are not subject to the control or right to control of the principal with respect to their physical conduct in the performance of the services.” The court clarified that the focus