It is important that businesses classifying workers as independent contractors ensure they are properly classified. Whether workers are independent contractors can have important implications for various federal and state statutes. For example, if a worker is an independent contractor, the business does not have to pay them overtime under the Fair Labor Standards Act. Many federal and state discrimination statutes cover only employers with a certain minimum number of employees. Title VII of the Civil Rights Act of 1965 (Title VII) and the Florida Civil Rights Act, for example, only cover employers with fifteen or more employees. Independent contractors are not counted for this purpose. This could exclude some small businesses that work with independent contractors outside the purview of Title VII. But how does one determine whether a worker is an independent contractor. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.
A worker is not an independent contractor simply because a business labeled them as such. The determination requires an in-depth legal analysis of the various aspects of the worker’s actual duties and relationship with the business. The Eleventh Circuit Court of Appeals established the following factors to determine whether a worker is an independent contractor under Title VII:
- the kind of occupation, with reference to whether the work usually is done under the direction of a supervisor or is done by a specialist without supervision;
- the skill required in the particular occupation;
- whether the ‘employer’ or the individual in question furnishes the equipment used and the place of work;
- the length of time during which the individual has worked;
- the method of payment, whether by time or by the job;
- the manner in which the work relationship was terminated; i.e. by one or both parties, with or without notice and explanation;
- whether annual leave is afforded;
- whether the work is an integral part of the business of the ‘employer;’
- whether the worker accumulates retirement benefits;
- whether the ‘employer’ pays social security taxes; and
- the intention of the parties.
Cobb v. Sun Papers, Inc., 673 F.2d 337 (11th Cir. 1982). Courts holistically assess these factors in determining a workers independent contractor status. No single factor is dispositive.
If an analysis of these factors shows that the worker is independent from the business, a court will likely find that the worker is an independent contractor. A lack of supervision under factor one generally indicates independent contractor status. Highly skilled worked under factor two tend to be independent contractors, and independent contractors tend to supply their own equipment under factor three. Independent contractors tend to work for shorter periods, unlike employees who tend to be hired indefinitely. Independent contractors pay their own social security taxes, provide employment benefits like retirement and annual leave, while employers pay these expenses and benefits for employees. In addition, independent contractors often perform services for the business that are not integral to the business. A small company that sells a particular product might hire an independent contractor CPA to perform accounting functions. Courts often consider the intent of the parties. If the business and the worker intend to create an independent contractor relationship, courts tend to honor the parties’ intent. This is often evidenced by a written contract between the parties stating the relationship an independent contractor relationship.
It is important that businesses that classify workers as independent contractors closely analyze these factors to ensure that these workers are properly classified. Properly classifying workers could avoid liability under the FLSA, Title VII, and other state and federal laws.
The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.