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.

Presentation at the Multi-State Conference

Last week The Coles Firm presented "From the Mouths of Babes: Straight Talk About Legal Ethics" at the 27th Annual Multi-State Labor and Employment Law Conference held in San Antonio, Texas. While ethics is extremely important to our profession, presentations on the subject often are dry. To maintain attendees' attention and spark intellectual debate, From the Mouths of Babes tracked lawyers, clients, employees, and ex-employees (all played by child actors) through a typical scenario involving the balancing of client demands and the rules of ethics. Below is a video clip of a scene from the presentation involving the defendant's attorney, Fred Buchanan, and the defendant's CEO, Hank Savage.

We enjoyed the opportunity to present at the conference and engage in insightful conversations with attorneys from across the U.S.

Potential Arbitration Changes in Texas

Arbitration of employment disputes might be in trouble. On March 6, 2009, Representative Dan Gattis (R – Milam, Williamson) introduced House Bill 2696 in the Texas House of Representatives during the 81st Legislative Session. The Bill was co-authored by Representative David McQuade Leibowitz (D – Bexar). The Bill seeks to amend portions of the Civil Practice and Remedies Code related to arbitration proceedings and arbitration agreements.

Specifically, the Bill would amend the Civil Practice and Remedies Code in Texas in the following ways:

1. Arbitration agreements must include a statement, initialed by each party to the agreement, stating the party has chosen to arbitrate a controversy that exists at the time of the agreement (if Subsection (a)(1) of the Civil Practice and Remedies Code applies) or stating each party has chosen to arbitrate any controversy that arises between the parties after the date of the agreement (if Subsection (a)(2) of the Civil Practice and Remedies Code applies);

2. Agreements to arbitrate must be prominently displayed in the document and in 12-point bold type; and

3. A party to a contract may not require any other party to the contract to agree to arbitration as a condition of the contract.

What does this mean? Right now, not a whole lot. The Bill was left pending in committee on April 15, 2009 and no further action has been taken by the Texas House of Representatives. Furthermore, the Texas Legislature adjourns on June 1, 2009 and does not reconvene until 2011 unless the Governor calls a special session. It appears unlikely, therefore, the Texas Legislature will take any additional action on this bill in the next eleven (11) days.

This Bill could signal a change on the horizon, though. If the Bill is re-introduced during the next session and further action is taken, the consequences could be significant. Currently, many employers require their employees to agree to arbitrate any potential employment disputes as a condition of employment. This Bill would prevent such agreements. Arbitration in the employment context could become a thing of the past.

For the time being, nothing is changing but we’ll keep an eye on the next regular legislative session and any special sessions and keep you updated. In the meantime, it is always a good idea to review your arbitration agreements and decide if arbitration is really the best idea for you and your company.

Coles Corner Winning Wine: April 2009 (Archive)

April 2009 - The 2005 Grenache Blanc from Curran Wines can be described best as starting with strong herbal/grassy notes of a Sauvignon Blanc then balanced with light sweetness and a slight hint of carbonation. But this is no dessert wine. The Grenache Blanc is crisp and delivers a lively fresh glass that is perfect for the season.

Employment-Based Immigration: What Every Student Should Know

On April 16, The Coles Firm presented the speech "Employment-Based Immigration: What Every Student Should Know" to a room-full of students at a local Dallas college. The speech primarily focused on employment-based visas including, H-1B, J, L, E, and TN. Also discussed were potential pitfalls with Green Card applications and non-immigrant visas.

Indicative of immigration law constantly changing and evolving, on the day of the presentation, the government extended the deadline for government contractors to enroll in E-Verify. Government contractors have until June 30, 2009 to enroll in E-Verify. This is the third extension of the deadline for government contractors. As discussed during the presentation, E-Verify is an internet based system that allows employers to quickly verify employment eligibility of new hires. Currently, E-Verify is voluntary (except Government Contractors) and free to employers. An employer must be enrolled in E-Verify for a student to be eligible for the STEM OPT extension (29 months work authorization versus standard 12 months).

We thoroughly enjoyed answering questions from the students and hopefully provided a framework for the students as they seek employment after graduation.