Bell Nunnally Explores Employee Classification in Texas Lawyer

Bell Nunnally attorneys Jay M. Wallace, Alana K. Ackels and Lindsey L. Goldstein recently authored “6 Factors for Determining Whether a Worker Is an Independent Contractor” in Texas Lawyer. The article explores the issue of employee classification – “employee” versus “independent contractor” – and offers practical advice for employers to consider and highlights some common misconceptions.

The authors note that the U.S. Department of Labor (DOL) considers a variety of factors in determining a worker’s status, including:

1. The extent to which the work performed is an integral part of the employer's business.
2. Whether the worker's managerial skills affect his or her opportunity for profit and loss.
3. The relative investments in facilities and equipment by the worker and the employer. If the worker brings his/her own equipment, it represents an investment by the worker such that he or she bears the risk of loss in the performing the work.
4. The worker's skill and initiative. Both employees and independent contractors may be skilled workers.
5. The permanency of the worker's relationship with the employer. Permanency or indefiniteness in the worker's relationship with the employer suggests that the worker is an employee, not an independent contractor.
6. The nature and degree of control by the employer.

A few common misconceptions highlighted include:

1. The validity of and inherent risk in designating a “contractor” relationship in an employment contract without considering the DOL’s factors.
2. The assumption that part-time or flexible hours leads to independent contractor status without first carefully considering the tasks being performed.
3. Placing too much weight on not paying benefits to a worker. Companies tend to put more stock in this aspect, but the DOL weighs all factors evenly.

The piece concludes by offering some quick questions companies performing a self-audit should ask:

1. Despite having an independent contractor agreement with the worker, does the company prescribe particular work hours or dictate the manner in which the work is performed?
2. Although the worker may operate as an independent contractor, does the company also require that worker perform other work outside the scope of the contract, such as preparation work, task reporting or client communication?
3. Does the company allow the contractor to work for others and turn down particular assignments?

To read the full article, please click here.