Texas Lawmakers Reject Employee Classification Bill

A bill that would have put more restrictions on employers in the construction industry in Texas will likely not pass this session, according to recent local reports. The bill would have closed a loophole that makes it possible for construction firms to classify full-time, permanent employees as independent contractors, which prevents them from having to pay payroll taxes and workers' compensation. This also makes it possible to deny workers overtime that they may be owed if they work more than 40 hours in a week.

One reason why misclassification is frequent in the construction industry is that it absolves employers of a duty to verify whether their employees are authorized to work in the United States via citizenship, legal permanent residency, or a work visa. Advocates for workers' rights say that it allows employers to take advantage of undocumented immigrants. 

About half of all construction workers in Texas are undocumented immigrants, according to a study from the University of Texas at Austin. Hiring and then misclassifying these workers and others in the construction industry leads to a loss of approximately $54 million in unemployment tax revenue for the state each year and more than $1 billion in federal income tax revenue.

The workers who are improperly classified as independent contractors also suffer from unfair pay and substandard working conditions. Employees have a right to fair pay and overtime when they work more than 40 hours in a week and can pursue an action for wage theft against their employer if they are not paid appropriately.

One lawmaker said that he supports the bill as a roofing contractor and views the measure as a way to make sure that everyone in Texas is playing by the same rules.

Source: Texas Tribune, "Misclassification Bills Likely Dead This Session," Julian Aguilar, May 16, 2013.