Is Your Business Correctly Classifying Contractors?

Many businesses hire independent contractors to accomplish work goals without taking on additional staff. While most employers make a good faith effort to comply with governmental regulations when classifying workers, few do so correctly. The cost of misclassifying an employee as a private contractor can be extremely high. Employers may face civil penalties, class action lawsuits and other costs.

The attorneys of Key Harrington Barnes PC regularly represent employers in litigation with the government agencies and in employee class actions regarding misclassification of workers as independent contractors. However, we would rather help avoid litigation by classifying workers correctly. Based in Dallas, we advise employers of all sizes throughout Texas in hiring and other employment matters.

What Is An Independent Contractor?

Simply calling a worker an independent contractor does not mean that he or she will meet the definition of contractor used by the Internal Revenue Service, Fair Labor Standards Act and Texas Workforce Commission.

Governmental agencies commonly use two tests to determine if a worker is an independent contractor or an employee:

  • 20 factors test: The IRS uses a list of 20 factors to determine whether an employee is an independent contractor or an employee. One of the factors is training. Employees receive training from the employer, while contractors do not need training. Another factor is integration. Employees are integral to the firm's overall operations and success. An independent contractor is separate from the firm's operations.
  • Texas economic realities test: The Texas Workforce Commission and other agencies use a five-part test, known as the economic reality test, to determine if a worker is a contractor or an employee. The first part of the test is the degree of control exercised over the worker by the employer. For example, if the employer tells the worker when to show up and how to do his or her job, the worker is an employee and not an independent contractor.

Our attorneys can usually determine whether workers are correctly classified simply by visiting your workplace and observing your workers. If we cannot clearly identify which workers are independent contractors, your company has a problem. In most cases, employers incorrectly classify workers as independent contractors when they in fact are treated as employees.

For Help In Classifying Workers As Contractors Or Employees

To avoid civil penalties and class action lawsuits over misclassification of workers as independent contractors, call our Dallas lawyers at 214-615-7925 or send us an email using our contact form.