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Independent Contractor Status

Getting Paid for Work

This article compares independent contractor status to employee status in Texas

Here, learn about what it means to be an independent contractor. Whether you’re an employee depends on the conditions of your employment, not your job title or work schedule. The law says you’re an employee unless your employer can show otherwise.

Am I an independent contractor or employee?

Whether you’re an employee or an independent contractor depends on the conditions of your employment, not your job title or work schedule. The law says you’re an employee unless your employer can show otherwise. Your employer might have misclassified you as an independent contractor when you’re actually an employee. Workers who are often misclassified include “temporary” workers, contract laborers, construction workers, maids, domestics, nannies, gardeners, and other workers who don’t have enough control over their work to be “independent contractors.”

The ability to set your own work schedule does not make you an independent contractor. Your job title does not make you an independent contractor. It’s about the work that you do.

Why does my employment classification matter?

Federal and state labor laws apply only to employees, not independent contractors. If misclassified as an independent contractor, you could miss out on overtime wages or other employee benefits or pay more in taxes. Employers are legally required to:

  1. pay employees minimum wage and overtime;
  2. pay employees at least twice a month;
  3. provide an earnings statement for each pay period showing hours worked, gross and net pay;
  4. provide a W-2 wage and earnings statement at tax time;
  5. pay employment taxes and other legal requirements.

Employers often misclassify workers to get around these laws. 

What if I’m not sure?

The main difference between an independent contractor and an employee is that an employee works for an employer and depends on the employer. An independent contractor is in business for themselves. If an employee gets laid off, they no longer have that job. If an independent contractor loses a contract, they still work for their own business and can seek other contracts.

The Department of Labor has identified six factors to help determine whether someone depends on their employer or works for themselves. Other factors may exist, but these are the main ones.

Ask yourself:

  • Can you make a profit or loss through your work? If your own decisions can create a profit or loss for yourself, you’re more likely to be an independent contractor. Note that this only includes managerial decisions. For example, deciding to work more hours for more pay is not a managerial decision. However, deciding whether to advertise would be a managerial decision, as would deciding whether to hire help.
  • What sort of investments have you made in the work? Spending your own money on work-related equipment, workspace, or advertising weighs toward your being a contractor. That said, buying a tool for work doesn’t automatically make you a contractor. But if you are investing capitalfor example, buying things that let you take more jobs or charge more for the jobs you do takethe more likely you are to be a contractor.
  • How long are you supposed to work for your employer? You are probably an employee if it looks more like a permanent job without an end date.
  • How much control does your employer have over the work that you do? If you have actual control over the meaningful aspects of your employmentwhat you do and how you do ityou are more likely to be a contractor. Setting your own work schedule is not enough to make you an independent contractor.
  • Is your work an “integral part” of the business? For example, if you work as a carpenter for a construction company that frames residential homes, you are integral to the employer’s business—they couldn’t do it without you. If the business is custom-decorated cakes, your work as a cake decorator is integral to your employer’s business. If you are an “integral part," you’re probably an employee.
  • Does your work require “special skill and initiative?" Special skills refer to the ability to make business decisions, not technical skills. If your work doesn’t require you to make business decisions, you’re probably an employee. 

You could be an employee even if:

  1. You signed a contract stating that you agreed to work as an independent contractor;
  2. Your employer provided a 1099-MISC instead of a W-2 Form (wage statement) to file with the IRS;
  3.  You were paid in cash or per job; or
  4. You have a flexible work schedule.

How can I protect myself?

If you want to recover unpaid wages or have some other legal problem, it’s important to get information on the person and company that hired you:

  • Contact information: Get the name, address, and telephone number of the person who hired you. Write down the make, model, and license plate number of their vehicle.
  • Work: Write down the location, dates, and hours you worked. Include the kind of work that you did, what you were paid, and what you are owed.
  • Written agreement: Try to get a written agreement that describes the work, how much you’ll be paid, and when. If the agreement isn’t in writing, it can still be enforced, but it’s more difficult to prove. Your testimony, receipts for work purchases, your notes about the job, and your time log can be used prove an oral employment agreement.
  • Demand letter: Write a “demand letter” to your employer demanding to be paid what you’re owed. Send one copy by certified mail, return receipt requested, and the other copy by first class mail to your employer.
  • Wage Claim (employees only): If you are an employee, you can file a wage claim with the Texas Workforce Commission within 180 days of when you were supposed to be paid. Independent contractors cannot file wage claims.
  • Lawsuit: If your claim is $20,000 or less, you can sue in Justice Court (small claims court) without the need for a lawyer. Justice court is for people who don’t have a lawyer or can’t afford one.

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