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New Texas Misclassification Law In Effect, Won’t Cover Residential, Commercial Construction

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On January 1st, Texas’ HB 2015 went into effect placing harsher penalties on employers who misclassify their workers as independent contractors on public works projects.  Despite representing an uptick in crackdown, some say the bill does not go far enough, doing little to even the playing field in residential and commercial construction.  But in a state known for exploitative practices, any progress is worth applauding.  

The Texas Construction Association provides background on HB 2015:

…the new law “amends the Texas Labor Code to require that employers awarded a contract for public works must ensure that any individual performing services under the contract for that employer is properly classified as an employee or independent contractor.  HB 2015 also requires a subcontractor employer under that contract for public work to classify properly an individual as an employee or independent contractor.  An employer who misclassifies is subject to a $200 fine for each individual misclassified.”

Construction Citizen says the laws passage marks the end of a long journey for several politicians from both sides of the aisle.

This was proposed by Representative John Davis, R-Houston, and sponsored by Senator Kirk Watson, D-Austin.  Davis is a retiring legislator who also pushed for a broader law that would have done much more to deal with the problem.  Davis joined with Senator John Carona, R-Dallas, in supporting a proposal to create fines for the misclassification of workers on all projects.  That push was met with stiff opposition from the largest home builders who contend their profit model would be disrupted and home prices would rise for Texans if they were subject to fines for misclassification.

Momentum has been building for years and reached a turning point in late 2012 when the Texas Workforce Commission voted unanimously to support a crackdown like the one that has now become law.  Prior to that vote, TCA’s Michael White testified before the commission that companies cheating by misclassifying their workers can underbid ethical contractors by as much as 25 percent.

Read one of our misclassification primers for the full slate of drawbacks resulting from this business practice.


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