Texas Independent Contractors laws & compensation compliance analysis

Texas Independent Contractors: What you need to know

Whether a worker is an “employee” or an “independent contractor” is critical when it comes to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In some situations, federal law will govern, but the question is most often resolved by looking to state law, particularly in areas such as unemployment tax liability, workers' compensation, and state wage and hour requirements.
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Texas's workers' compensation law defines an independent contractor to be a person who contracts to perform work or provide a service for the benefit of another and who ordinarily:
• Acts as the employer of any employee of the contractor by paying wages, directing activities, and performing other similar functions characteristic of an employer-employee relationship;
• Is free to determine the manner in which the work or service is performed, including the hours of labor or method of payment to any employee;
• Is required to furnish or to have employees, if any, furnish necessary tools, supplies, or materials to perform the work or service; and
• Possesses the skills required for the specific work or service (TX Labor Code Sec. 406.121).
Employment covered by the Texas unemployment compensation law is defined as service performed by an individual for wages or under an express or implied contract of hire, unless it is shown that the individual's performance of the service has been and will continue to be free from control or direction both under the contract and in fact (TX Lab. Code Sec. 201.041). By implication, an independent contractor would be a person whose services do not meet the above test. ...

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