Our Lake Mary business lawyers know that employment contracts are a top concern for Florida small business owners. There are many reasons small businesses hire independent contractors as opposed to employees. The company enjoys reduced overhead and workers have greater flexibility. Still, there are specific legal considerations must be made for both types of workers, and it’s important new small businesses (or those considering a revamped workforce structure) discuss these arrangements with a skilled business attorney who can help ensure you avoid any meritorious breach of contract or wage theft allegations.
Contract litigation in Florida can be costly, but it’s often avoided by preparing with legal consultation.
The fact is, while many large companies have long preferred to use contractors for certain types of work, small businesses are increasingly doing the same, as noted by a recent Entrepreneur.com article. Although there isn’t any government data that measures the use of contract workers by all small businesses, information from the Internal Revenue Service on sole proprietor use of these workers reveals that between 2003 and 2011 (the latest year for which data is available), contract labor spiked from 3.5 percent to 6.4 percent.
Several years ago, the Florida Supreme Court issued a precedent-setting ruling in Earth Trades, Inc.v. T&G Corp., wherein the majority held that a contractor not properly licensed (in industries where it is required) has no grounds to bring a contract dispute claim against a licensed contractor. However, the court still maintained the unlicensed contractor’s right to defend against breach of contract claims filed against them. If contractors want to bring a lawsuit against the company that hired them, the contractor will need to go through proper licensing procedures.
At first blush, that might seem like incentive for businesses to hire unlicensed contractors, but there are many reasons companies should avoid this. First, if you’re in an industry like construction, F.S. 553.84 establishes private causes of action for violation of state building codes – including specific penalties for unlicensed contracting as outlined in F.S. 489.13. As noted by the Florida Department of Business & Professional Regulations (DBPR), there are numerous services for which one needs a license. In general, if you pay another person to construct a building or structure, make structural alterations to load bearing walls or perform a service such as plumbing or conditioning, that person has to have a state contractor’s license.
Another reason it’s important to discuss your workforce structure with a small business attorney first is there are complex federal and state laws that dictate how we define independent contractor versus employee, and each has its own pay structure rules. The U.S. Department of Labor notes that employee misclassification (an increasingly common phenomenon where employees are wrongly identified and paid as independent contractors) can result in litigation as well as steep fines. One can generally guess as to the nature of an employment relationship as defined under the federal Fair Labor Standards Act, but it’s better to have your Lake Mary business attorney make sure you’re in compliance.
If you are concerned about your independent contract workers – whether with regard to classification, licensing or breach of contract – our dedicated business attorney is here to help.
Contact the Florida business attorneys at The Chidolue Law Firm, serving Orlando and Lake Mary, by calling (407) 995-6567 or email us.
Additional Resources: Small business is using more contractors, Aug. 12, 2014, By Scott Shane, Entrepreneur.com
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