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Employees vs Independent Contractors

On Behalf of | Sep 1, 2021 | Firm News |

Are you hiring an employee or an independent contractor? If you are an employer, it is crucial to understand the differences. Since federal and state labor laws only apply to employees, an incorrectly classified employee may result in fines and penalties against the business owner.

Who is considered an employee in Texas? Employees are hired for a specific position by a company and are expected to obey orders from the employer. Independent contractors, however, are self-employed, providing contracted services to various parties. They enter into an agreement with the expectation that they are free from control.

What are the differences between an employee and independent contractor? In Texas, the main difference between the two is based upon the level of control the employer has. A worker is an employee is if the employer has the right to direct or control the worker, both as to the results and the details of when, where, and how the work is done.

The Texas Workforce Commission (TWC) has a common law test used to determine whether a worker is classified as an employee or an independent contractor. Some key components include:


  • Instruction and Control: If the employer says where to go and leaves it up to the worker to get the work done, they may be an independent contractor. If the worker is directed on how to do it, they are likely to be an employee.


  • Training: If the employer is training the worker, they are probably an employee.


  • Equipment and Expenses: If the employer provides equipment and pay expenses to the worker, they are probably an employee.


  • Benefits: If the employer provides benefits, such as healthcare and 401(k), the worker is an employee.


  • Employment: If the person works solely for one employer, has set hours of work, and would not have time for another employer, they are probably an employee. Independent contractors regularly work for numerous customers or clients.


  • Payment: If the employer pays a weekly salary that is not dependent on performance, the worker is probably an employee. Independent contractors are usually paid by the job and don’t get paid if a job is done poorly.


If you require an independent contractor agreement or an employment agreement, consult an experienced lawyer. If you believe you have misclassified a worker or have any potential questions regarding your status as an employee or independent contractor, we welcome you to contact one of our board-certified business attorneys at 713-572-4900.



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