Whether or not a person is an independent contractor or an employee can have significant ramifications. For example, only employees are protected by the Fair Labor Standards Act (requiring the payment of a minimum wage and overtime compensation), and the employment discrimination laws. Also, employers must pay employment taxes for employees but not for independent contractors.

The determination of whether an individual is an independent contractor or an employee requires a complex analysis and is not based on whether or not the individual signed an agreement or received a Form 1099-Misc. Under the law, the status of employee cannot be waived by signing a contract stating that the person is an independent contractor. Thus, the fact that a contract may state that a person is an independent contractor is not controlling. The courts have generally stated that the employer-employee relationship is tested by “economic reality” and not by applying “technical concepts.” There is no single test for determining whether an individual is an employee or an independent contractor. The facts and circumstances of each case must be carefully examined.

For example, among the factors which courts have considered significant are the following: (1) the permanency of the relationship; (2) the nature and degree of control exercised by the principal; (3) whether the services rendered are an important part of the principal’s business; (4) the amount of investment in equipment and facilities made by the alleged contractor; (5) whether the alleged contractor provides services to other principals; and (6) whether the alleged contractor can dictate the manner and method of providing the services.

It is immaterial who pays the individual, such as in the case where an individual is paid by a payroll company or a staffing company. Florida courts have reiterated time and time again that what matters is the substance of the relationship, not the form of the relationship as may be indicated by documents signed by the parties (e.g., independent contractor agreements).