Texas Legislature 2013 - Will Texas Employers Come Onboard with Employee Misclassification Legislation

As the Texas Legislature begins its 2013 regular session, employers across the state are looking at proposed legislation to place tighter controls on preventing employee misclassification. Misclassification is a practice used by many unscrupulous companies where they take people who should be classified as hourly employees and instead classify them as 1099 subcontractors. This gives them an unfair competitive advantage over companies who properly classify their employees and cheats the state and taxpayers on many levels as discussed below.

See related article by Scott Braddock: "Purge Texas' Underground Economy"

The legislation being proposed this session would apply to commercial contractors bidding on and working on state and local government contracts. This would help prevent the kinds of abusive situations I have reported on in the past like the Mansfield ISD building projects and Houston ISD wage theft and bribery allegations.

Many Houston businesses have been heavily involved in supporting the legislative process. Marek Brothers Construction is one of those companies that follows the law on properly classifying employees. Marek's president, Stan Marek, spoke before the Texas Workforce Commission recently to explain the impact of the problem. He told the commission that “our employees are employees. We take good care of them. Our industry has gravitated to people more and more not wanting employees. This is rampant in our industry. If it doesn't change, our company won’t able to survive.”

This week, Scott Braddock wrote on Construction Citizen about a meeting in North Texas that construction industry leaders in that area are meeting to look at whether they should support misclassification legislation. Braddock stated, "Members of the Government Affairs Committee of TEXO in Dallas/Fort Worth met to talk about their legislative priorities on Monday and by all accounts they had a lively discussion about the issue of worker misclassification. Comprised of members from throughout North Texas, TEXO is one of the largest construction industry trade associations in the state."

Jack Baxley, TEXO Vice President of Government Affairs, told Braddock members of the group are still mulling their options and they'll hopefully have recommendations ready by the end of the month. “This isn't something that just popped up today,” he said while noting that TEXO wants to make sure that any legislation passed is good for the industry.

Circumvention of the law hurts Texas and Texans in many ways. When ethical companies lose bids to unethical companies, valuable jobs for Texas families are lost.  The state of Texas loses valuable tax revenue and unemployment insurance payments. Single parents lose child support as 1099 contractors are how many deadbeat parents hide from the Texas Attorney General's child support enforcement. This forces many single parents onto welfare costing taxpayers yet again. The federal government also is cheated out of much needed taxes for Social Security and Medicare. Employee misclassification and 1099 contracting is also a magnet for illegal immigration and provides an often unsafe working environment where injured workers without Workman's Compensation are dumped on taxpayers in emergency rooms. Wage theft and payroll fraud are also common in these unethical companies.

Braddock also spoke with David Bloxom, president of Speed Fab-Crete located in Fort Worth about this issue. He told Braddock his company has been underbid on several jobs by unethical contractors that commit payroll fraud. He added that increased media coverage of the issue has raised awareness within the industry and with lawmakers. “I think there are a lot of people who are aware of it now on both the general contractor level and subcontractor level who want a level playing field. They're tired of all this circumvention of the law.”

Texas has an opportunity to create a level playing field for construction companies who properly classify their employees. Many of these companies also provide health benefits to their employees and create a career path which improves the quality of construction for our government facilities that we, as taxpayers, must support for decades to come. Hopefully these TEXO members will come on board and join the other Texas construction companies who are already supporting this legislation. They will meet again next week to discuss this issue.

This is simple legislation the House and Senate should be able to deal quickly with if businesses will support it. Let's get this out of the way early so it doesn't get lost in budget debates, school financing, healthcare costs and other important issues facing the state legislature.