What's The Difference Between Independent Contractor And Employee Status?

It is not always easy to understand why some workers are classified as regular employees and others are designated as independent contractors, but the distinction is very important.

Employers have a different relationship with the two groups. Employees are entitled to the benefits of the employment agreement, which include paying into state and federal unemployment funds, paying social security taxes and paying workers' compensation premiums.

With independent contractors, these obligations do not exist. For economic reasons, then, employers often prefer the looser agreement they have with independent contractors. But it is important not to cross the line and wrongly classify workers just to save money.

The courts and federal agencies will often conduct an "economic realities test" to determine if misclassification is occurring. The mere fact that the worker may have signed an independent contractor agreement or formed a corporation will not be enough to establish independent contractor status, though this is one factor to be considered in the test.

If workers are heavily dependent on the business they work for, have worked for that business a long time, must follow a specific schedule and rules imposed by the business, are doing the same type of work the business provides, are given tools or materials by the business, are paid by the hour or salary rather than by the job, and so forth, they are probably employees, not contractors.

Some employee misclassification considerations include:

  • Who exercises control in the relationship?
  • What is each party's level of loss in the relationship?
  • Who pays for materials, supplies and equipment?
  • Does the relationship have the appearance of a permanent understanding?
  • Is the worker essential to the business' success?

These are technical questions but they have practical everyday implications. Employment laws apply generally to employees, not independent contractors. Workers' Compensation benefits are provided to employees, not independent contractors. Unemployment compensation benefits are given to employees, not independent contractors, and so on.

Sound Employment Law Representation for South Florida

Our employment law attorneys can help you understand the differences between these important designations. Employers cannot afford to improperly classify workers when so much is at stake.

Let's talk about your situation. Call us at 954-889-5125. We look forward to your call!