Houston is one of the US’s business hubs, and our tech start-ups, refineries and gig platforms love the phrase “independent contractor.” However, a label on a 1099 never settles your legal status, federal and Texas rules do.
Employee or contractor?
Courts apply the economic-realities test and focus on facts, not paperwork. They consider control, like who sets the hours and methods. They consider work related tools, like whether you buy your own laptop, truck or safety gear. They also look at whether you have an opportunity for profit or loss. For example, can smart business choices boost (or sink) your earnings.
Courts also look at how your work is integrated into the company’s overall business. For example, is the company’s core product built on your labor? And, they look at whether the job is permanent. Are you tethered to one firm or free to chase other gigs? The U.S. Department of Labor breaks down each factor in Fact Sheet 13, which is mirrored in the Texas Workforce Commission guide.
Why the label matters
Employees enjoy minimum wage, overtime, unemployment insurance and workers’ compensation. Independent contractors shoulder those costs themselves. Misclassification shifts payroll taxes and legal risk onto workers. Just about every year, there are six-figure back-wage awards that hit firms that wrongly pay crews as contractors.
Federal and state playbooks
The controlling federal rule is 29 C.F.R. Part 795. The Internal Revenue Service uses its own three-bucket test on behavioral, financial and relationship factors. Texas perspectives appear in the Texas Unemployment Compensation Act.
Bottom line for Houston workers
Job titles on a contract or badge cannot override legal definitions. Measure your day-to-day reality against the factors and resources above. Correct classification protects paychecks, taxes, long-term benefits and prevents ugly surprises when auditors knock.