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Texas Continues Its Surprising Leadership Role on Bipartisan Employee Misclassification Reform

In Texas, testimony was heard on behalf of SB 676, a bipartisan bill that aims to crack down on employee misclassification in the Lone Star State. Filed by Republican State Senator John Carona, the bill is garnering support from business groups, labor groups, and concerned politicians alike.

Testifying at the hearing were Rick Levy of the Texas AFL-CIO, Emily Timm of the Workers Defense Project and John Hinson of Marek Brothers Systems, among others. Hinson spoke about the unfair advantage granted to those who purposefully misclassify workers:

“All it does is it punishes the violators,” he said. “Right now there are no fines. There are no deterrents if you get caught cheating.” Hinson also said the landscape will change for the worse, sooner than later, if the state doesn’t give the Workforce Commission a law with some teeth. “This is something we need to stop now before the rest of us legitimate contractors are forced to do it the wrong way,” he said.

The new bill, as analyzed and extensively covered by Texas GOP Vote:

• Leaves the current common law test definition in place for independent contractor.
• Imposes a penalty of $100 for those in construction that misclassify their worker for the first time.
• Imposes up to a $1,000 penalty per employee, for each subsequent violation (this amount will be determined by the Texas Workforce Commission on a case-by-case basis).
• Allows an employer to appeal a violation and get the violation removed or get the penalty reduced based on certain criteria.
• Requires the Texas Workforce Commission to submit a report to the Legislature about its efforts to curb misclassification of construction workers.

The main accomplishment of this bill will be giving existing laws sharper teeth via increased penalties. It is receiving bipartisan support because it does not create any new regulation on business. The right-leaning Texas GOP Vote made sure to justify their support of the bill:

While normally, we would oppose burdensome regulations on businesses, this bill helps create a level playing field for all companies. Currently unethical companies cheat the system and create an unfair competitive advantage while at the same time, robbing Texas taxpayers by not properly paying employment taxes. This is a proper role for the state government. By enforcing the existing laws, companies will be able to equally compete in contract bids and workers receive equal protection under employment law.

The bill still needs to be voted out of committee and amendments may still be made. The Workers Defense and the Texas Association of Business (TAB) would both like to see part of the money collected go towards the state’s Unemployment Insurance Fund. This, they say, would help contractors who abide by the law but have felt the sting of an increasingly unfair playing field over the past few years:

Vice President of Governmental Affairs with TAB Cathy DeWitt said that would be a “good way to help employers who are doing it the right way.” The Workers Defense Project in Austin echoed that point. “Those additional costs to recoup those funds are paid by companies that are playing by the rules,” said Emily Timm, Policy Analyst with Workers Defense.


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