1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

Dallas Business Attorney: Properly Classifying Texas Business Employees

Dallas business attorney, Richard “Ric” Armstrong, offers insight about how to classify your employees to minimize drama and problems.

The U.S. Department of Labor identifies the misclassification of employees as “one of the most serious problems facing affected workers, employers and the entire economy.” Businesses that make this mistake often pay stiff tax penalties to the IRS—and face other types of turmoil that your Dallas business attorney will have to unwind. Seemingly innocent categorization errors can thus create a basket of challenges:

• You may have to pay unexpected taxes and fees;
• Your employees could take action against you for violating wage and hour rules, like the Fair Labor Standards Act, or even stricter rules in effect in some states (And even if they don’t, if they discover that you’ve improperly classified them to their detriment, the culture you’ve carefully cultivated could collapse!)
• To clean up the mess, you’ll have to turn attention away from where it should be—growing your competitive advantage, marketing, recruiting, etc.
• Speaking of recruiting, if word gets out that you’re misclassifying people (to avoid paying overtime, e.g.), good luck getting “A” players to come work for you and buy into your mission.
With all that said, what should you do? How can you ensure that your company complies completely with both Texas and federal employment law?

Are Your People Employees or Independent Contractors?

The IRS classifies workers in four possible ways: employee, independent contractor, statutory employee and non-statutory employee. Most companies, however, only need concern themselves with the first two: employees (W-2) and independent contractors (1099). Many businesses like to hire independent contractors because when they do so, they don’t have to worry about payroll or Social Security taxes for these laborers. However, if a contractor functions more like an employee in the eyes of the law, the government may cite you for misclassifying.

The State of Texas offers a helpful guide for determining correct employee classification based on 20 criteria. Let’s look at a few of the most common criteria to illustrate:

• Work hours: An independent contractor sets her own work hours to complete the agreed-upon work. If you require a contractor to work set hours, the government may be more likely to see that worker as a W-2 employee.
• Location: An independent contractor may generally complete the work at a location of his choosing. If you require the work to be done on work premises, you might be misclassifying an employee as a contractor.
• Sub-tasking. If you exclusively require the person you hired to do the assigned work, you may have hired an employee. Independent contractors may subcontract their work out to others if they choose.
• Instructions and training. When you hire a contractor, you trust that person to complete the task according to her own methods and workflow. If you require training or give too many specific instructions, the government might view that person as an employee.

A Dallas business attorney can offer more advice on the correct classification of Texas employees. For an appointment, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297).


Richard L. Armstrong, Principal


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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297