Employee or contractor: the classification that costs the most to get wrong

A growing business hires help and calls it contract work. Sometimes that is correct. Often it is not, and the decision is not the employer's to make by preference. The tests used by the IRS and by state agencies look at the substance of the relationship. Behavioural control: who decides when, where and how the work is done, and whether there is training and supervision. Financial control: who supplies tools, whether the worker has unreimbursed expenses, whether they can make a profit or loss, whether they work for others. And the relationship itself: written agreements, benefits, permanence, and whether the work is core to the business. A worker who is scheduled by the business, uses the business's equipment, follows its methods, works only for it and does the thing the business does, is very likely an employee no matter what the paperwork says. Getting it wrong is expensive in layers: unpaid payroll taxes with interest and penalties, unpaid overtime under wage and hour law, and workers' compensation exposure — and in Florida the construction industry has stricter coverage thresholds than other industries. An injury to a misclassified worker without coverage is the scenario that ends small companies. The correct contractor relationship is easy to document: a written agreement defining a scope and a deliverable rather than hours, an invoice from a business entity, a certificate of insurance, and a W-9 on file before the first payment rather than in January. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com