Florida’s Independent Contractor Laws Explained

What Constitutes An Independent Contractor in Florida

The state of Florida defines independent contractors as workers who are generally free from the control and direction of the employer in relation to the performance of their work, both under the contract for services and in fact. While the element of control is crucial in determining the status of a worker, Florida also considers other factors, such as whether the individual maintains a separately established business. The more longstanding and comprehensive that business is, the stronger the case that the worker is a legitimate independent contractor.
The question of whether the worker is truly engaged in an independently established business turns on several additional factors , such as whether the services are available to the public at large, whether any unique qualifications are required to perform the work, and whether paying customers can give instructions to the independent contractor regarding how the job will be performed after first engaging the business’s services. If some of these factors are present, the worker is more likely to be considered a legitimate independent contractor with his or her own business and not improperly classified as an employee.

Key Rules And Laws Regarding Independent Contractors

The various statutory provisions, court decisions and common law governing independent contractors impacting businesses in the State of Florida is quite vast. Several statutes favor, and thus strengthen independent contractor relationships while others seem at-odds with this contract of the parties. This section will focus on the primary laws and statutes regulating the independent contractor agreement and relationship with respect to the Florida legal framework.
Florida Statutes § 440.02 – This statute provides the traditional definition of independent contractor found in employment dispute cases across the country. This definition however contemplates an employee/employer relationship and not parties entering into an independent contractor relationship. This will be discussed in greater detail below.
Florida Statutes § 440.591 – This statute codifies the Independent Contractor Exemption for real estate sales associates.
Florida Statutes § 440.591(4) and (5) – These statutes code the Real Estate Sales Associate as an agency, which is its own legal entity, authorized to engage in real estate sales, and a sale associate as an employee of the brokerage firm.
Florida Statutes § 440.591(2)(a)- Florida Department of Financial Services must review and approve any agreements where a real estate sales associate waives workers’ compensation benefits. Specifically any agreement set forth between the sales associate and the employer must be in writing and signed by both parties but may be contained in a standard employment agreement form approved by the Department of Financial Services.
Florida Statutes § 440.591(2)(a)- The written waiver agreement must:
(i) identify the beneficial class of employees to whom the agreement applies,
(ii) be at least 3 font sizes larger than the largest typeface in the document, and
(iii) be provided to the Department of Financial Services within 10 days of being requested.
Florida Statutes § 440.591(2)(b)- The written waiver agreement must also include a statement that:
(i) the sales associate waives compensation under Florida’s workers’ compensation law,
(ii) this agreement or other written waiver is not required, and
(iii) the sales associate may opt out of this agreement at any time.
Florida Statutes § 440.591(2)(C)- The employer of the real estate sales associate may elect to contract to provide workers’ compensation benefits to a real estate sales associate enrolled in a commission sharing agreement.
Florida Statutes § 440.591(2)(d)- Employers may not require a real estate sales associate to enter into this agreement.
Florida Statutes § 490.005(4)(dd)- The Board of Psychology issued an Informational Notice regarding Independent Contractors and the clinical practice of psychologist and psychological associates and their independent practice arrangements with other mental health professionals. This Notice can be found at http://www.floridahealth.gov/licensing-and-regulation/psychology-license/index.html
Florida Statutes § 455.207- The Department of Business and Professional Regulation have established a policy regarding written contract requirements for business organizations. Specifically the policies provide that all business organization shall be estopped from asserting a claim against any real property, person’s residence, personal property, or other property owned or in the possession of a former or present partner, officer, director, member, manager of the business organization, or employee or independent contractor of the business organization that:

• (1) arises out of a transaction on behalf of the business organization;
• (2) appears in the records of the business organization; or
• (3) has been ratified or adopted by the business organization

Florida Statutes § 55.10 – This statute provides Interest on Judgments and Decrees. The rate of interest paid by the Florida Department of Financial Services for this interest on judgments shall be more than the average yield on the ongoing 20-year United States government securities for the preceding month.

Florida’s Test To Determine Contractor Vs. Employee

Independent Contracting & Independent Contractors in Florida
Florida has several tests and criteria in place to determine an employee’s classification as an independent contractor. These tests and criteria involve looking at several factors from the hiring process to the duties of the individual worker. These various tests can change from agency to agency and from federal to state, so it becomes important for an employer to understand the differences. The IRS, for example, has a 20-point test. An employment determination will be determined based on the totality of the 20 points. Florida uses the Common Law Test. Under the Common Law Test, the courts look at the eight factors outlined below, which was the precedent set by Florida’s First District in the case of Skirvin v. Richard’s Supermarket of Panama City, Inc., 113 So.2d 225 (Fla. 1DCA 1959).
The Florida Bar has also identified the following tests typically used to determine whether a worker is an employee or an independent contractor: (1) the right of the employer to control the details of the worker’s activities; (2) the kind of occupation (business dependence upon a specific business), the nature of the business, and the skill required in the particular occupation (professional, skilled, or semi-skilled); (3) whether the work is done under the direction of someone who supervises the details rather than the final result or whether the services are rendered in a specific sequence or order; (4) the level of supervision given by the employer; (5) whether the employer is in business; (6) the worker’s investment in materials or equipment; (7) whether the services are part of the regular business of the employer; (8) whether a separate business is engaged in by the worker; (9) whether the work is performed on an employer’s premises; (10) whether the employer controls the worker’s hours of work; (11) the method of payment (by the hour, week, commission, etc.); (12) whether the worker hires other workers; (13) whether the work performed requires special skill or labor; (14) whether the worker or employer provides the facilities and tools necessary for the work to be performed; (15) the duration of the employment; (16) whether either party may terminate the relationship without incurring liability to the other (any contractural agreements); (17) whether the worker can quit without incurring liability; (18) whether similar jobs are available in the locality; (19) the nature and degree of control on the part of the employer; (20) whether the worker was hired as an employee or an independent contractor. Under the Florida Workers’ Compensation Act, a determination is made whether the worker had the requisite independence in his or her occupational skill and whether the worker was free from control or direction by the employer. In Jensen v. Brower C. Smith, Inc., 511 So.2d 250 (Fla. 1st DCA 1987), the appellate court restated the common law definition of an "independent contractor" as "a person who renders service in the course of an independent occupation, retaining control over the means and method of performing the services…[and] who is not itself in the business in which the services are rendered." Therefore, to determine independent contractor status under Florida’s Workers’ Compensation Act, it is required that the employee has the requisite independence in his or her occupational skill and is free from control or direction by the employer.

Rights Of Independent Contractors

Frequently, people believe "independent contractor" status means they are exempt from taxation or other legal obligations, such as paying child support. That is incorrect. Numerous tax forms at both the federal and state level require independent contractors to identify themselves, their trade/occupation, address, phone number, etc. If you contract for services, you need to provide them with a proper tax identification number (your social security number, or your company’s identification number). If you pay them over a certain threshold you will have to issue a 1099-MISC or W-2, and a host of other forms, such as a Schedule C for individuals or 1065 for LLCs. Further, this means you have to comply with wage and hour laws. Accordingly, you must be diligent in "clocking" your less-than-full-time workers in and out and accounting for their hours.
You are also responsible for what "your" independent contractors do on the job, even where they are working off-site. If your independent contractor breaks your business’s public safety rules, even when off the clock, you may be on the hook. In Florida, this has become an area of significant litigation and awards of substantial damages for actions by "independent contractors."

Misclassified Contractors And Their Consequences

One of the most common targets for enforcement actions, the Treasury Inspector General for Tax Administration recently reprimanded another Florida company for misclassifying its employees as independent contractors. Just one of 20 companies audited, the Coos Bay, Oregon-based camera retailer discovered that it will now owe more than $700,000 in federal and state taxes, penalties and interest on employee pay from 2010-2012. The IG recommends additional IRS Training and Outreach to Detect Worker Misclassification and Improve Identification of Noncompliance. In its report, the agency singled out two subordinate causes of the problem: the difficulty in determining misclassifications , and the failure on the part of employers to recognize the problem and self-report to the Service. The legal classification of a worker as an employee or an independent contractor often presents significant challenges to employers, with many employers mistakenly classifying employees as independent contractors. Proper classification is significant because the federal and state governments regulate the classification of employees in order to protect workers. Additionally, employee misclassification may also lead to the employer owing substantial back taxes, interest and penalties.

Engaging An Independent Contractor the Right Way

For a Florida business to ensure that the individuals it engages to perform work are treated as independent contractors, it should do the following:
• Require the independent contractor to enter into a written agreement that meets the criteria discussed below.
• Make as few deductions for taxes as possible, e.g., do not withhold state or federal taxes, including FICA, unless the independent contractor requests that such taxes be withheld in writing, and document that request.
• Document the nature of the work being performed by requiring the independent contractor to invoice the Company for all time worked. The invoice should describe the work performed and show the time expended in performing the work.
• Document all communications and transactions with the independent contractor, so that there is a clear, contemporaneous record that the Company is treating the individual(s) as an independent contractor(s) and not as a Company employee.
• Be careful not to bind the independent contractor for a period of time, without the independent contractor’s consent, to perform services for the Company.
• Do not require the independent contractor to work certain hours or be at the Company’s offices during certain times or to attend meetings convened by the Company or participate in team-building or bonding activities.
• Make timely payments to the independent contractor for all services rendered. This step is especially important when the amount of work being performed by the independent contractor is small.
• Document the extent to which the Company has the right to terminate the work being done by the independent contractor for any reason and whether the independent contractor has the right to terminate the work being performed thereafter.
• Make contingent payments to the independent contractor based upon results achieved. If payments are contingent on performance, the independent contractor is less likely to be deemed an employee.
• Ensure that the independent contractor does not meet the definition of "employee" set forth under the ACA. For instance, under the ACA, any individual who actually performs services at or for the Company, even if he or she is called an independent contractor, is an employee and therefore must be treated under the ACA as an employee of the Company.

Remedies and Dispute Resolution

Despite the great flexibility afforded by Florida independent contractor agreements, there are situations that may arise where independent contractors are not provided with the protections afforded under Florida law. As described above, Florida Statutes §725.06 provides independent contractors with a statutory lien upon "any money or other thing of value owed to them" for any amount due for services performed by them under an independent contractor relationship. The statute further provides that, if suit is brought, the independent contractor may recover reasonable attorneys’ fees. An independent contractor may pursue legal action to enforce this statute in the event of a breach of an independent contractor agreement.
Florida law provides several ways to address formal grievances. For example, under Florida Statutes §768.66, an independent contractor may sue another independent contractor for defamation. Under Florida Statutes §381.95, an independent contractor may sue another independent contractor for unfair competition. Under Florida Statutes §440.381, a workers’ compensation claimant may sue an independent contractor for misclassifying a workers’ compensation claimant as an independent contractor instead of an employee. Under Florida Statutes §436.10, an independent contractor may sue an employer who wrongfully denies unemployment benefits. Finally, Florida Statutes §501.204 allows an independent contractor to sue a small business for false advertising (but this tort is exempt from suit unless authorized by the Attorney General of Florida).
In addition to the legal remedies mentioned above, it is arguably appropriate for an independent contractor to seek an equitable remedy such as breach of contract—specifically, specific performance, injunctive relief, and/or restitution. On at least one occasion, a Florida district court has awarded specific performance of the terms of an independent contractor agreement, subject to certain conditions. See Phillips v. Mervyn’s Inc., 44 So.2d 656 (Fla. 3d DCA 2010). With respect to injunctive relief, a Florida court has held that an employer is not entitled to an injunction prohibiting entry upon an employer’s premises by former independent contractors who have signed noncompete clauses with their prior employer. See Shirt Shack, Inc. v. Smith, 700 So.2d 757,758 (Fla. 5th DCA 1997). With respect to restitution, a Florida court has stated that when a party colludes with another to wrongfully commit fraud, a court will impose upon such party a confidential helping hand to aid others in vindicating the wrongs. Lutz v. Reitnauer, 517 So.2d 664, 666 (Fla. 4th DCA 1987); see also Shufford v. Peters, 29 So.2d 818, 820 (Fla. 1947).
Even as an alternative to pursuing a civil action as indicated, independent contractors may also seek to invoke any one or more of numerous informal dispute resolution mechanisms that are otherwise set forth in Florida law. For example, an independent contractor in Florida can file an administrative complaint with the Florida Commission on Human Relations if the independent contractor believes that he or she has been discriminated against in his or her independent contractor relationship because of his or her race, color, national origin, sex, pregnancy, religion, age, disability, marital status, or familial status. See Fla. Admin. Code R. 60Y-5.008. In addition, a party may elect to submit a dispute to arbitration as per the Florida Arbitration Code, the Federal Arbitration Act, or an applicable industry-specific arbitration statute. See Fla. Stat. §682.031 (2005). In addition, parties to an industry-specific collective bargaining agreement may invoke the grievance and arbitration procedure articulated in Fla. Stat. §447.401 (2005).

Recent Amendments And Changes To The Laws

There have been no significant changes to the laws governing independent contractors in Florida during the last year. However, there are currently several bills pending in the Florida legislature that, if signed into law, will amend the laws in this area. These bills are moving along nicely in their respective houses of the Florida legislature, and have been favorably reported out of their committees. Given the fact that the 2016 Florida legislative session concludes in early March, it is highly unlikely that any of these bills will become law until sometime next year.
At present, there are three bills which add or modify the statutory list of occupations that may use independent contractors. A fourth, House Bill 471, adds more clear language to the statute that allows businesses to use sophisticated, experienced, higher income earners as independent contractors.
House Bill 189 states:
Only the following occupations are not eligible to use independent contractors to perform the professional services listed below:
A person who performs the following professional services is eligible to use an independent contractor to perform such services:
This subsection does not apply to licensed dentists, dental hygienists, physicians, and architects.
House Bill 197 states:
Currently, all violations of employment compensation laws, including minimum wage and overtime laws, are classified as first degree misdemeanors, subject to a $1,000 fine and/or 1 year in jail. This bill changes all violations of employment compensation laws shall be third degree felonies, subject to 5 years in prison and a $5,000 fine. This bill expressly applies to violations of Florida’s Independent Contractor Act. The change in punishment is likely to increase the penalties imposed against employers misclassifying their employees as independent contractors.
House Bill 471 states:
Any employer, including an employer engaged in interstate commerce, may, subject to the provisions of this chapter, employ an individual as an independent contractor to perform work regardless of the nature of the work, the amount of control the employer has over the employee, or the method by which the worker is paid , if all of the following requirements are met:

• (1) The employer provides the individual with a written agreement. The written agreement must describe the nature of the work, the method by which the individual is compensated, and any other terms and conditions of the agreement.
• (2) The individual has the ability to accept or reject the work offered by the employer and otherwise has the ability to work for other individuals or employers.
• (3) The individual possesses the requisite skills to perform the type of work offered by the employer.
• (4) The individual provides the equipment and the materials required to perform the work.
• (5) The individual is free from control or direction over the performance of the work, both under the contract of service and in fact. Factors that determine whether control is exercised include, but are not limited to, whether the employer:

(a) Provides training or direction regarding how to perform the work;
(b) Determines the individual’s work schedule or location;
(c) Controls the individual’s order, frequency, or amount of completion of work or product;
(d) Replaces or discontinues the individual’s work; or
(e) Controls the individual’s use of advertisements or stationery;

(6) The individual is not offered fringe benefits or other facilities provided to employees.

Whether a person is an employee or independent contractor is a question of law dependent upon several factors. It is unclear whether Florida courts will determine the various changes to federal independent contractor case law to be controlling in determining the independent contractor status of a Florida business. Employers should therefore have their independent contractor relationships reviewed by an attorney familiar with this area of the law.
Given that there are independent contractor relationships that the employer should be concerned about, it is often best for an Employer to have an internal audit of all relationships, both those in which the Employer wants to categorize the worker as an independent contractor and otherwise. The former type of relationships should be appropriate for a memorandum or opinion letter confirming the independent contractor status. More problematic relationships should be handled through consultation with an attorney directly.