If it walks like a duck and quacks like a duck, then it probably is a duck.
One of the never-ending discussions for the construction industry in Florida is whether a trade, supplier or independent contractor is an employee. Figuring the answer out will help clear it up to at least murky water.
The state of Florida holds the construction industry up to a different standard than other industries in Florida. Medical, legal, manufacturing, and hospitality businesses are required to implement a workers' compensation policy at their practice when they have four or more full-time or part-time employees, including corporate officers. However, companies in the construction industry must have workers’ compensation insurance once they employ an employee, regardless of full-time or part-time status.
Officers of Florida corporations registered with the Florida Department of State, Division of Corporations, can choose not to be covered under the workers' compensation policy. If your construction company is an LLC, you can show, as proof, a notarized statement of 10% corporate ownership.
"I know. You are a general contractor and you subcontract all your work out to subcontractors."
Are they subcontractors or independent contractors? The general rule is that an individual is considered an independent contractor if the payer has the right to control or direct the result of the work and not what will be done and how it will be done. You are not an independent contractor if you perform services that can be regulated by an employer (what will be done and how it will be done). This applies even if you are given freedom of action.
Therefore, the question to ask is, "Does the employer have the legal right to control the details of how the services are performed?" If the answer is yes, then they're not an independent contractor.
For a simple risk management tool, make sure your subcontractor's (independent contractor) agent sends you a certificate of insurance that shows they have their own workers' compensation. If they say they are a small contractor with no employees but themselves, make sure they give you a copy of their exemption. You should require them to sign an independent contractor affidavit. But beware, carriers are now no longer considering that your subcontractor can earn more than $100,000 by himself. Workers’ compensation carriers are starting to examine those 1099's carefully and may assume there are unreported employees helping your subcontractor.
Below is an excerpt from a carrier's letter, explaining how they will decide.
"Exempt contractors with compensation over $100K during a policy period, must either furnish a WC certificate of insurance or verification of any labor materials used by the exempt contractor for consideration. Failure to provide this information could result in a portion of the contractor's distributions being included in the final audit for the general contractor."
If you have any questions, please feel free to contact us at +1 (866) 306-5803. We would be glad to help you review your risk management program and make suggestions!