Texas employers are required to classify workers properly as employees or independent contractors in order to remain in compliance with state and federal law. Texas employers have a range of responsibilities concerning employees, but those same responsibilities do not apply to independent contractors. Misclassification can result in penalties and legal issues for employers, so it is critical to ensure that workers are accurately classified. What is the independent contractor test in Texas? According to the Texas Workforce Commission (TWC), there are various independent contractor tests in existence, including an “economic reality” test that is commonly used by the U.S. Department of Labor, the “ABC” test that is used in some states other than Texas, and an “Eleven Factor” test used by the Internal Revenue Service (IRS).
The TWC also has its own independent contractor test. While all the tests generally aim for the same overall determination and more often than not result in the same determination, you should talk with your legal counsel about which of the tests to utilize and how to approach the issue. The TWC independent contractor test has 20 factors for employers to consider in classifying workers.
Factors for the TWC Independent Contractor Test
Workers generally are employees if an employer has the right or ability to control the worker in particular capacities. The following are the factors employers in Texas should use to consider whether a worker is an independent contractor or an employee, along with questions that can help you to determine whether the factor leans toward classifying a worker as an employee or independent contractor:
- Instructions: Does the worker receive instructions from you about how, where, and when to perform the work?
- Training: Is the worker required to receive training?
- Integration: Is the worker merged into your business’s overall operation?
- Services rendered personally: Can the worker assign tasks to others?
- Hiring, supervising and paying helpers: Is the worker supervised by you?
- Continuing relationship: Is the worker’s relationship with you long-term or indefinite?
- Set hours of work: Does the worker have set hours of work?
- Full time required: Is the worker required to work full time for you?
- Location where services performed: Can you tell the worker where to perform their work or services?
- Order or sequence set: Does the worker need to perform tasks in the order you outline?
- Oral or written reports: Is the worker required to submit reports to you?
- Payment by the hour, week, or month: Is the worker paid on a regular basis at the same frequency?
- Payment of business and travel expenses: Do you cover business and travel expenses for the worker?
- Furnishing tools and equipment: Do you furnish tools for the worker?
- Significant investment: Does the worker have an investment in your business?
- Realize profit or loss: Does the worker realize profits or losses?
- Working for more than one firm at a time: Can the worker perform services for other employers at the same time?
- Making service available to the public: Can the worker advertise their services to the public?
- Right to discharge without liability: Can you fire the worker without liability?
- Right to quit without liability: Is the worker responsible for job completion?
It is important for employers to know that all of the following factors do not have to weigh in favor of a specific worker being an independent contractor for that worker to be classified as an independent contractor. A majority of the factors, or a totality of the circumstances, suggesting the employer does not have the right to direct or control the worker can mean that the worker is an independent contractor.
Contact a Frisco Employment Law Attorney
If you need assistance with the TWC independent contractor test, or if you have questions about classifying workers, one of our Frisco employment law attorneys can assist you. Contact Simon Paschal PLLC to learn more.