Most Florida businesses understand the distinctions between employees and independent contractors in terms of taxes, minimum wage laws and benefits. However, difficulties arise in classifying workers correctly. An employer may believe that a worker is an independent contractor because that is what the contract says. Similarly, an employer may mistakenly believe that paying someone like a contractor confirms that as the legal status of the business relationship. In fact, the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act determine independent contractor classification.
Economic dependency or personal business
Labor laws look at the nature of the business relationship between an employer and worker. Employees function in a position that makes them economically dependent on the employer. Independent contractors function as people who are in business for themselves. They provide a service to the company and have the freedom to provide services to other companies.
Employment contracts do not erase labor laws
As an employer, you may assume that, if you and a person willingly sign a contract stating that the person is an independent contractor, then the person cannot be classified as an employee. Such a contract, however, does not override the legal definition that a contractor possesses economic independence and controls how work is done. A company relying on contracts to establish employee classification may need to conduct additional research to ensure compliance with labor and wage laws.
1099 does not transform workers into contractors
An employer that pays a person without withholding payroll taxes, reports the income with a form 1099. However, use of form 1099 alone does nothing to establish someone legally as a contractor.