Employee Versus Independent Contractor: Avoid 3 Hiring Mistakes Florida Businesses Often Make
The process of hiring someone to work for you can be nerve-wracking and riddled with potential traps that can have expensive legal consequences.
Drawing up a hiring contract, whether with an employee or an independent contractor, without a clear idea of employer responsibilities and employee rights can cause many problems for your business. A local Florida business lawyer can be an essential partner to your business when seeking to hire and in assisting you to select whether to do it as an employer-employee relationship or in an independent contractor basis. The cost of hiring a Florida business lawyer may end up being beneficial when facing potential huge costs and problems, and to help you avoid mistakes.
Mistake #1: Not consulting with an attorney regarding Florida legal services before classifying employees versus independent contractors
Florida businesses, especially startups, can sometimes confuse independent contractors and employees. Sometimes businesses make this mistake deliberately in order to bypass hour and wage laws or expensive payroll taxes that apply to employees but not independent contractors.
If your misclassification of an employee as an independent contractor leads to the violation of hour and wage laws, it could mean having to pay the employee's entitled wages along with payroll taxes and penalties, along other potential fees and actions against your business.
As a result of the examination of years of cases and rulings, 20 factors have been identified to help determine whether an individual should be classified as an employee or an independent contractor. The degree of importance of each factor varies depending on, for instance, occupation and circumstances in which the services are being performed. As a result, these 20 factors serve as guides but do not provide a black-or-white answer to the classification. A Florida contract lawyer will be able to help you navigate the rules and understand these 20 guiding factors.
Note that the IRS laws can be complex and authorities may enforce classifications subjectively on a case-by-case basis. A general rule of thumb is if the business provides the place of work, controls the hours of work and the quality of work, they are most likely creating an employer-employee relationship. The higher the degree of control, the higher the likelihood the individual would be classified as an employee.
Mistake #2: Thinking That Employee Agreements to Pay Their Own Taxes are Enough
Many businesses have employees sign agreements, due to budget limitations, stating that the workers are responsible for paying their own taxes. Such an agreement cannot protect the employer if the worker meets the tests for employee classification.
It is advisable that you consult with your accountant to properly determine potential strategies to help you, as an employer, reduce payroll taxes.
Mistake #3: Thinking That a Contract Makes an Independent Contractor
A common scenario that takes place when new workers are hired is that the workers are often not aware of their status as an independent contractor. They sign a contract that labels them as an independent contractor and the employer think the contract is enough. However, the contractor may not meet contractor status according to IRS rules as explained above.
The employee should be assessed against the 20 IRA factors of classification. A Florida business lawyer can assist you and your business review these factors with you, and assist you in drafting the appropriate agreements that may help in characterizing a particular individual as an employee or independent contractor.
To Sum Up
While there is no clear division in the classification of an individual as an employee vs. as an independent contractor, it is recommended that your business seek Florida legal services from a Florida business lawyer to help your business navigate the differences between an employee and a contractor. Does the hired party have the right to perform their job in a way they see fit? Do they hire and pay assistants? Is the hired a licensed professional working without supervision? Are they paid by the job or for the hour? These are some of the questions to ask in order to find out if you have hired an employee or a consultant/contractor.
Nico Apfelbaum, Esq. is the managing attorney of Apfelbaum Law, a Florida law firm serving Port St. Lucie, Stuart, the Treasure Coast and assisting clients with matters throughout Florida. Apfelbaum Law provides a wide variety of legal services, including, family law, divorces, business and contract transactions and litigation, immigration, wills and estate planning, probate law, and real estate law. The attorneys of Apfelbaum Law will answer your questions, explain your options, and provide you with the tools and resources you need to make an informed decision.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.