Are You Properly Classifying Employees and Independent Contractors?

Recently our Firm has noticed a trend with the Texas Workforce Commission ("TWC") in which the TWC finds employers are improperly classifying employees as independent contractors. In Texas, an employer must pay unemployment tax for each employee. An employer, however, does not pay unemployment tax for any independent contractors associated with the employer. TWC uses a twenty factor test to determine whether a worker is an employee or independent contractor and, therefore, whether employers must pay unemployment taxes associated with the worker.

Whether in response to the economic hardships we currently face or a belief that employers are manipulating the system, TWC appears to be auditing companies and industries with a history of classifying workers as independent contractors. Despite these companies' history of classifying workers as independent contractors, TWC has reversed prior decisions and determined these independent contractors should be classified as employees. The repercussions of TWC's determinations are devastating since employers now must pay several years of unpaid taxes and fines. Looking forward, the repercussions could become more severe as the long-standing business structure of many companies loses viability because of the increased unemployment tax. The real consequence, however, is not the minimal state tax (usually 2.7% in Texas). The real consequence is employers may owe the federal government nearly 15% for the same workers. Typically this amount is split 50-50 between employees and employers; employers who fail to withhold, however, may be forced to pay the entire amount.

What does this mean for you, the employer? If you use independent contractors in your business, even if you have used independent contractors for years, check with an attorney to determine if these workers are properly classified. An audit of your workforce should not take long and can save your company legal issues down the road.

Firm Happenings

Summer has arrived at The Coles Firm, which means we here at the Firm have decided to get out of the office a little.

Food For Thought: In just over two weeks, Food for Thought takes place. Food for Thought is a celebrity chef event hosted by the Dallas Association of Young Lawyers (DAYL) and co-sponsored by The Coles Firm. As a member of DAYL's 2008 Leadership Class, Dustin is one of the organizers on the Food for Thought committee and has been instrumental in the planning and preparation for this fantastic event. The proceeds from the event go to Big Thought, a non-profit creative learning organization striving to make imagination a part of everyday learning for children using arts, culture, and education as tools and catalysts. The event includes several great Dallas chefs, including Lisa Garza of Food Network's The Next Food Network Star, Blythe Beck of Central 214, and Marco Martinez of Matt's Rancho Martinez. Shelly Slater of WFAA Channel 8 will act as the Mistress of Ceremonies for the evening and Rep. Rafael Anchia will present The Gavel of Excellence award to Blockbuster President and CEO Jim Keyes. There is still plenty of time to buy tickets. We look forward to participating in this event and supporting a great cause.

Ties That Bind: This Summer, The Coles Firm also will assist another great DAYL committee, Ties That Bind. Ties That Bind works with local schools and organizations to teach young people the importance of dressing professionally and making positive first impressions. As part of every presentation, young men and women are taught how to tie a necktie or scarf and are provided a necktie or scarf of their own as a gift for their future development. Paul is a leading co-chair on Ties That Bind and is currently preparing several great presentations in the upcoming months. We're very excited to see what Paul has in store for this committee this year.

Teen Leadership Academy: Dustin is also a co-chair for DAYL's Teen Leadership Committee and this July the committee is hosting the inaugural Teen Leadership Academy for high school students entering their senior year next fall. Every high school in Dallas (both public and private) was invited to submit a male and female of their choice to participate and the committee got a great response. Using prominent Dallas leaders, the two-and-a-half day conference will include team building exercises and presentations focusing on leadership, community service, and the future of Dallas. The conference will culminate in a community service project.

DAYL's One to Watch: The Coles Firm also wants to recognize Dustin and Paul for each being named a DAYL "One to Watch." In January, Dustin was recognized by DAYL as "One to Watch" for his active participation and support of DAYL. A few months later, Paul was recognized as the "One to Watch" in May because he personifies the bright young leaders we need in the legal community. The Coles Firm appreciates Dustin's and Paul's enthusiasm and desire to participate in DAYL and further The Coles Firm's mantra, "Committed to Our Community."

As you can see, it's shaping up to be a busy summer. Of course, we wouldn't have it any other way.

Coles Corner Winning Wine: May 2009 (Archive)

Margerum's M5: Add 50% Syrah, 27% Grenache, 9% Mourvedre, 4% Counoise, and 4% Cinsault, and that leaves 6% to creativity. M5 is an amalgamation of 5 grapes from 15 vineyards. The result is a very drinkable and flavorful red wine that satisfies newcomers and connoisseurs alike. The fruit is vibrant and complex but not overwhelming.