Misclassification: employee or independent contractor

By Adrian Middleton, Sword & Shield, PLLC · Updated Friday, October 9, 2026

Misclassification of status: employee versus independent contractor

In the construction industry

There is no independent contractor test. Section 440.02(18)(c)3 makes an independent contractor working in the construction industry an employee, and (c)2 makes anyone paid by a construction contractor as a subcontractor an employee unless the subcontractor has a valid exemption or has secured its own coverage. A 1099 form changes nothing. The only questions are whether the person was paid, and whether a certificate or policy covered them on the dates of payment.

Outside construction

Section 440.02(18)(d)1 excludes from 'employee' an independent contractor who is not engaged in construction and meets at least four of six criteria:

1. Maintains a separate business with his or her own work facility, truck, equipment, materials or similar accommodations.
2. Holds or has applied for a federal employer identification number (unless a sole proprietor not required to have one).
3. Receives compensation paid to a business rather than to an individual.
4. Holds one or more bank accounts in the name of the business for paying business expenses.
5. Performs or can perform work for others at his or her own election without an employment application or process.
6. Is paid on a competitive-bid basis or for completion of a task or set of tasks under a contract that does not expressly state an employment relationship.

If four are not met, the person may still be an independent contractor on full consideration of seven further factors about control, expenses, profit and loss and continuing obligations. The burden of proving independent contractor status is on the person claiming it (s. 440.02(18)(d)1.c).

The $5,000 per-worker penalty

Section 440.107(7)(f) authorizes a $5,000 penalty for each employee the employer represented to the Department or the carrier as an independent contractor who is determined not to be one. Section 440.10(1)(f) authorizes the same amount as a per-employee cap. This is added on top of the premium-based penalty. Telling the investigator 'they are all subs' when they are not is the most expensive sentence an owner can say on a job site.

Misclassification of duties: the class code

Premium depends on the class code, and the rate for roofing is many times the rate for clerical. Section 440.107(2) provides that an employer who materially misrepresents or conceals employee duties so as to avoid proper classification is deemed to have failed to secure coverage, even with a policy in force. The order that follows uses the 24-month lookback, and section 440.105(4)(b)6 makes knowingly misrepresenting classification to reduce premium a felony.

The reverse error is just as common and works against you: the auditor codes every worker to the highest-rated class observed on site. An office manager who visited the job gets coded as a framer. Records showing who did what, where, are what fix it.

Red flags investigators look for

• Workers who say they are paid by the hour, told when to show up, and use the company's tools, but receive 1099s.
• 'Subcontractors' with no license, no insurance, no business entity and no other customers.
• A policy showing $40,000 of clerical payroll for a company pulling $2 million of permits.
• Workers listed as officers of LLCs formed the week they were hired.

Questions