W-2 EMPLOYEE VS 1099 INDEPENDENT CONTRACTOR

One thing that often causes confusion, and can potentially cause legal issues for a contractor or applicant is the difference between W-2 employment versus being paid as a 1099.  When being paid by a W-2, an individual is legally employed by that company, has taxes automatically deducted from his pay and, perhaps most importantly, is covered by his employer’s worker’s compensation insurance.  None of these apply to a 1099 independent contractor.

How does this affect me as a contractor?

As a contractor it’s important to note that anyone working for you as a W-2 employee can legally perform work under the purview of your license, with you as the license holder being ultimately responsible for the work.  Alternatively, it is important for contractors to know that anyone who is paid as a 1099 independent contractor, or a ‘subcontractor’, must hold his own license covering the work to be performed as well as carry his own worker’s compensation insurance or exemption.  While penalties for the unlicensed party are considered criminal in nature, the licensed contractor who hires unlicensed subs can also be subject to penalties against his license and fines.  Always be sure that any subs you hire are properly licensed and insured.

How does this affect me as a license applicant?

According to Florida Statutes, experience toward any contractor’s license can only be gained as a W-2 employee of a licensed contractor (except in cases where the applicant is the owner of a company qualified by a contractor’s license and pays himself through a draw).  The employee must also have been covered with worker’s compensation throughout the experience gained.  For example, if an individual has worked 10 years for an Electrical Contractor and has been paid through a 1099 for the entire time frame, he is considered to have no valid experience toward obtaining his own license.

While the majority of contractors make every effort to be in compliance with all of Florida’s rules and regulations, this is one that is often violated without knowledge.  Always be sure to check that your subs are properly licensed and insured.  It goes a long way toward avoiding any of these issues.

If you would like to talk this through, or ask any questions, feel free to contact us. We are here to help.