As many reports have made clear, the construction sector here in Florida — both residential and commercial — is finally starting to show signs of sustained growth following the nightmare that was the recent recession. This means builders are getting more projects and workers are relying on steady paychecks.
Interestingly, recent reports have also revealed that during the recession, some contractors here in the Sunshine State and across the nation choose to resort to underhanded and illegal tactics in order to secure government work, which was generally the only type of work available given that private construction jobs had all but disappeared.
Here, these contractors would simply classify those people who should have been treated as regular employees as independent contractors.
What is the advantage of such a move?
When contractors wrongly classify their employees as independent contractors they do not have file unemployment taxes and do not have to withhold income taxes from their employees, leaving them to pay taxes on their own at a much higher rate. This intentional employee misclassification, a felony under Florida law, enables these contractors to undercut the competition in terms of labor costs, all but guaranteeing they will win a construction bid.
“There’s always going to be a scheme to avoid your taxes or any other cost of doing business the right way,” said an official with the Florida Home Builders Association. “It is a formidable cost to be a legitimate contractor complying with all the rules.”
While there is really no single way to determine whether an employee is an independent contractor, they are typically viewed as highly skilled workers who work for a variety of companies and run their own business.
In the above-mentioned scenarios, many employees who should have been classified as highly skilled workers were instead classified as independent contractors, including those engaged in trades requiring far less formal training and education (painting, drywalling, carpentry, etc.).
Fortunately, with the economy improving and more work — public and private — to go around, it appears as if this illegal practice is being scaled back to a certain degree. It is nevertheless a development worth monitoring, as it effects the state’s entire construction industry.
Stay tuned for developments …
If you are an owner, developer, general contractor or subcontractor looking to get a project off the ground in the right way, consider speaking with an experienced legal professional to learn more about your rights and your obligations under both state and federal law.
Source: McClatchy DC, “For Florida companies that play by rules, success is tough as nails,” Nicholas Nehamas, Sept. 4, 2014