Worker Classification. An employer is required by law to classify its workers on construction projects as employees or independent contractors. It is becoming increasingly prevalent that companies are not classifying properly. By not classifying properly, a company does not pay its fair share of taxes, giving the company an unfair advantage at bidding time on construction projects. Current law, with its minimal penalties for violators caught misclassifying employees, is not an incentive for compliance with the law. Legislation is needed to strengthen the law by increasing the monetary penalties for non-compliance. The legislation must provide some safeguards to allow companies to continue using legitimate independent contractors on construction projects.
The Worker Classification bill for the 84th Texas Legislature has been filed. Read HB 434 for more information.
For Talking Points on Worker Classification for communication with legislators and their staff, click HERE.
For the STATUS of Worker Classification, visit http://www.capitol.state.tx.us/ Enter the bill number in the box.
Then Texas Workforce Commission rules dealing with the misclassification of employees resulting in the non-payment of unemployment taxes and the resulting penalties for the non-payment of those taxes can be found at the following link. http://www.twc.texas.gov/ui/tax/law_ch4_04.html
A resource that contains information on worker classification statutes in other states can be found at the following link. http://www.ncsl.org/research/labor-and-employment/employee-misclassification-resources.aspx
The IRS Independent Contractor Test can be found at the following link. http://www.twc.state.tx.us/news/efte/appx_d_irs_ic_test.html
Click on the following link to read a press release from the U.S. Dept. of Labor’s Wage and Hour Division regarding a Phoenix drywall company agreeing to pay back wages, damages and penalties for misclassifying its employees as independent contractors. http://www.dol.gov/opa/media/press/whd/WHD20140827.htm
In May 2014, the Massachusetts Attorney General filed a complaint against a drywall company for allegedly misclassifying workers as independent contractors in violation of the Massachusetts Independent Contractor Law. Click on the following link to read the press release regarding the complaint. http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-05-16-universal-drywall-lawsuit.html
Below are links to news articles which deal with the worker classification issue in Texas.