Contractors and Employees: Know the Difference

The words employee and independent contractor are often thrown about haphazardly. But doing so can have serious legal consequences. That’s because some laws apply to employees, but not to independent contractors.

But when an independent contractor isn’t provided with rights under federal laws, and then it turns out that you misclassified that contractor and he or she should have been an actual employee all along, you could owe thousands of dollars in government fines, or lawsuits filed by the government or employees.

Remember that just because you think someone is a contractor doesn’t make it so. It doesn’t matter what you call someone — the law will look to certain factors to determine if someone is, in fact, an independent contractor.

And you can bet that if an independent contractor sues you for not providing him or her some right or benefit that employees are supposed to have, that contractor will argue that he was, in fact, a full employee and should have been given those rights or benefits.

Freedom to Do the Job

With contractors, an employer usually doesn’t have any right to tell a contractor exactly how to do his or her job or what tools to use for the job. But with employees, the employer can tell the employee not just what the employer ultimately wants, but also how to do their job, or what processes and procedures to use.

Training and Equipment

Employers usually won’t provide any training to a contractor, the way the employer would to an actual, full employee. Contractors also generally will provide their own tools — whatever instruments, tools, machinery or technology that is needed to do the job. Whereas the company will provide these things for an employee.

Ongoing Relationships

Certainly many contractors can and do perform repeated work for a single company or employer. But unlike employees, who go to work every day, no matter how much work they have that day, a contractor is only there to do specific work at specific times, and generally is free to be anywhere else when there is no work needed for the company.

Freedom

Freedom is a large part being an independent contractor. Contractors will often set their own hours and days, so long as the work is done in the time frame needed. A contractor wouldn’t have to, for example, ask to leave early to go to the doctor, or ask if he can come in a bit late and then work later.

Contractors also may have the freedom to work remotely or from a location other than the company offices.

Exclusivity

While there are some contractors that can be restricted with whom they can perform work or services for, a hallmark of being a contractor is that he or she is free to work for other people or companies — even, sometimes, competitors. Employees clearly wouldn’t be allowed to do that.

Don’t get in trouble with state or federal employment laws. Call our West Palm Beach commercial litigation attorneys at Pike & Lustig to help you.

Sources:

floridarevenue.com/taxes/taxesfees/Pages/rt_employee.aspx

irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined