Victory in Texas' Battle over Employee Misclassification

Gov. Perry Signs HB 2015For nearly three years, we have been bringing you information about the problem of unethical companies that misclassify workers as independent contractors when, in reality, they are employees. They do this for a variety of reasons including getting an unfair competitive advantage over legitimate companies who properly classify their workers as employees or, in many cases, they use it to bypass the I-9 process for verifying that people are legal to work in this country.

Because of massive pressure from the home builders associations, Perry Homes and David Weekly in particular, the Texas Legislature has been reluctant to take bold steps to level the playing field for all companies despite pressure from the Texas Workforce Commission, commercial building companies and other business associations. However, during this legislative session, a small victory was passed by the legislature and signed into law by Governor Rick Perry.

Construction Citizen reports that House Bill 2015 was signed by Gov. Perry in June after the bill was passed. Quoting the Texas Construction Association, the report states, "This legislation amends the Texas Labor Code to require that employers awarded a contract for public works must ensure that any individual performing services under the contract are properly classified as an employee or independent contractor. The bill also requires a subcontractor employer under that contract for public work to classify properly an individual as an employee or independent contractor. An employer who misclassifies is subject to a $200 fine for each individual misclassified."

This is a small step in the right direction, but we have much further to go to really make reforms that will put some teeth in the law and force unethical companies to comply with the law. Texas State Senator John Carona led the fight this year to make meaningful reforms, as did State Representative John Davis. The House version of the stronger bill was passed out of committee but died in the Calendars Committee. Next session we will work with you, our readers, to create the kind of pressure that will be needed to overcome the special interests that would seek to maintain lawlessness in the construction industry.

The construction industry has been singled out because it is where the largest number of misclassification violations occur, according to a study conducted by the University of Texas. "Build a Better Texas" revealed that 40% of construction workers are misclassified as independent contractors rather than employees. This misclassification deprives the state and federal governments of lawfully authorized tax revenues and cheats ethical companies from being able to fairly compete. It also acts as a magnet for illegal workers from other companies who often hide in the misclassified jobs and are frequently abused by their employers with substandard wages and even wage theft.

We will continue to monitor this issue and bring you updates on legislative hearing during the off session period of the Legislature. With your help we can restore the rule of law and create a level playing field for all businesses in Texas.

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