The misclassification of employees by companies is a serious problem, and it often leads to issues regarding workers’ compensation, payroll, and the rights and protections they receive from legislation pertaining to these classifications. Companies most frequently misclassify employees in low-wage-earning jobs, particularly ones with many immigrant workers, by deeming them “independent contractors” instead of full-time employees who are eligible for the protection that labor and wage laws provide.
According to the National Employment Law Project, the typical result of this misclassification is a decrease in the payroll expenses on the part of employers to the tune of 15-30%. Underreported wages have been estimated by the US Government Accountability Office, to total (at least) $436 million. Whether accidental or intentional, the misclassification of vulnerable employees is unjust, and states have recently been passing legislation to stop this harmful practice.
According to the Treasury Inspector General for Tax Administration, “The misclassification of employees as independent contractors is a nationwide problem affecting millions of workers that continues to grow.” Considered by many to be a source of fraud, states face an uphill battle in identifying the workers that have been misclassified, and it is impossible to help those they cannot find.
Misclassification of employees doesn’t just hurt the worker; it also harms the states and other businesses. States are harmed because they have to compensate workers, something that may cause budgetary problems — although it is absolutely necessary, as the alternative is untenable. Other, law-abiding, businesses are harmed because they are forced to compete with unethical companies that are misclassifying their labor and cutting corners to save money. They have an unfair advantage over law-abiding businesses, and some suggest this leads to a “race to the bottom” where workers’ standards are consistently lowered in order to compete in the economy.
While there are things workers can do when they have been misclassified and defrauded, such as organize a coalition, file a claim, or hire a lawyer, it is important to note that states are passing laws to combat this problem. Florida is one of them. If you believe you have been a victim of misclassification, whether you are a citizen or non-citizen, it is important to become aware of these laws. In this article, we will give you four of the most important points pertaining to workers’ misclassification and compensation laws, as it affects the Florida worker.
“Independent contractor” isn’t defined by just one characteristic in Florida — in fact, there’s no real, specific definition of it at all.
Because of this lack of precise definition, it is up to employers to decide who is and isn’t an independent contractor. This decision puts workers at risk of misclassification in Florida, although theoretically, they are supposed to accurately determine all statuses in order to correctly include all employees on Florida’s Employer’s Quarterly Report. Misclassification can result in an employees’ inability to obtain adequate reemployment assistance benefits. In Florida, misclassifying your employees is considered a felony.
In order to qualify for reemployment assistance benefits, you have to abide by Florida Stat. Ch. 443, which defines the working relationship between an employer and employee according to common-law rules that are applicable. These common-law rules look at ten factors in order to determine whether or not someone is considered to be an employee. These ten factors are related to the working relationship between the employer and employee. These common-law definitions are similar to but separate from, the IRS’s criteria for what constitutes an independent contractor.
The construction industry is highly connected to this law.
The construction industry, in particular, has drawn a lot of focus related to the misclassification of their employees. According to Florida law, an employer working in the construction sector must obtain workers’ compensation coverage employees working full-time or part-time. Employees not only include laborers, but they also include sole proprietors, corporate officers (members of a limited liability company are included in this category), and partners.
A contractor in the construction industry who takes advantage of subcontracting has to prove that they are providing their workers with workers’ compensation protections. If the subcontractor isn’t covered, the employees of the subcontractor then become statutory employees of the contractor. There remains a responsibility to provide workers’ comp. The responsibility means that contractors have to pay benefits to their workers. Securing compensation is required by Sections 440.10(1) and 440.38(1) of Florida law.
These are serious, codified criminal violations.
It is considered a felony in Florida to misclassify your employees. The degree of the felony depends on how much money was stolen from employees — the monetary value of the fraud in question. The determination of degree is further defined in s. 775.082, s. 775.083, or s. 775.084 of the Florida legal code. In Florida, the statute of limitations for fraud is five years.
A Memorandum of Understanding between the U.S. Department of Labor, Wage and Hour Division, and the Florida Department of Revenue, General Tax Administration.
This Memorandum of Understanding was signed on January 13, 2015, and is set to expire on January 13, 2013. The Memorandum was entered into by the Department of Labor’s Wage and Hour Division in conjunction with the Florida Department of Revenue’s General Tax Administration. The Memorandum was drafted in the spirit of providing access to clear compliance information for employers and employees. It also promotes cooperation during investigations into cases such as misclassification of employees by sharing resources and enhancing the enforcement of the law. In fact, in 2014, Florida was actually given a grant by the US Department of Labor in order to further efforts to detect and prosecute on the issue of employee misclassification. Florida was one of nineteen states to receive this grant.
If you believe that you are a victim of employee misclassification, call our offices today at 800.952.1622 for a consultation to learn more about your rights.