Misclassification Hearing is Set in the Texas House

A Texas House Committee has set a hearing on the issue of worker misclassification and what more the state may need to do to combat the problem that is particularly rampant in the construction industry.

The House Business and Industry Committee will take testimony on the implementation of a limited crackdown that was signed into law by Gov. Rick Perry last year. The hearing is slated for Tuesday, April 22 at the state capitol.

Here is the official announcement, which says the panel of lawmakers will be looking into "the issue of misclassifying employees as independent contractors on workers, employers, income tax withholding, and the unemployment insurance system. And the review of current statutory deterrents, including those required by HB 2015." That bill just took effect on the first of this year.

The practice of employee misclassification happens when companies pretend their workers are independent subcontractors when, by law, those workers should be properly classified as employees. This is not at all to say that there aren't legitimate uses for subcontractors, but the IRS has pretty clear definitions for how workers are to be classified for tax purposes.

The bill signed by Perry last year takes aim at those companies that misclassify their workers on government work. Per the Texas Construction Association, it "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."

A broader crackdown on misclassification failed in the Texas Legislature last year after it ran into stiff opposition from the largest home builders. Commercial construction executives, like Mike Beeter of BRI Roofing and Sheet Metal in Fort Worth, said the practice has to end if there's going to be a sustainable workforce moving forward.

“As an independent contractor, you’re on your own. If I was a young person looking at careers, that wouldn’t be very attractive as a career,” Beeter said. “To me, there has to be an investment by companies in their employees to create the workforce five, ten, fifteen, twenty years down the road. A decade from now it might take a general contractor twice as long to build a project than it would today. There’s not going to be any workers."


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