Texas Employment Law Basics for Employers: Hiring – Employees or Independent Contractors?

Many employers would prefer to consider their workers to be “independent contractors” rather than “employees.” Using independent contractors reduces payroll taxes and tax reporting requirements, provides some measure of insulation from potential liability, and eliminates the need to provide employee benefits. However, you should be very careful; simply calling someone an “independent contractor” will not protect you from potential liability. 

With increasing frequency, employers have found themselves on the wrong end of an investigation by state or federal agencies which determined that their workers do not meet the legal test to be considered independent contractors. Those employers must pay back taxes, penalties, and interest related to their newly-designated employees.

There is a test with about twenty (20) factors used by the government and Texas courts when determining whether someone is an independent contractor. It’s a very fact-specific analysis, in other words – it depends on each individual situation. But in general, a true “independent contractor” works independently of the employer’s control, and is usually able to work for more than one employer at any given time. If you dictate when, where and how the work is to be performed, you set the hours of work, you require full-time devotion to your business, and the worker has no ability to work for others in the same field of competition, you probably have an “employee.” 

By: Cynthia W. Veidt, Attorney