Texas Employment Law Update — May 2019
Unemployment Compensation and Employee Classification in Gig Economy
On April 26, 2019, the Texas Workforce Commission (TWC) amended the state’s unemployment insurance law, at Tex. Admin. Code tit. 40, § 815.134, to develop an employment status analysis for workers who use a marketplace platform’s digital network to conduct their own independent businesses. Such workers are commonly referred to as “gig workers,” and Uber and Lyft are examples of the digital platforms to which this law relates.
The law was amended to add a nine-factor test to determine a worker’s independent contract status and thus relieve companies utilizing digital platforms (and gig workers) from unemployment insurance requirements. Accordingly, if a marketplace contractor meets all of the following nine factors, then the worker will be classified as an independent contractor and not an employee:
- All or substantially all of the payment paid to the contractor is based on a per-job or transaction basis.
- The marketplace platform does not unilaterally prescribe specific hours during which the marketplace contractor must be available to accept service requests from the public (including third-party individuals and entities) submitted through the marketplace platform’s digital network.
- The marketplace platform does not prohibit the marketplace contractor from using a digital network offered by any other marketplace platform.
- The marketplace platform does not restrict the contractor from engaging in any other occupation or business.
- The marketplace contractor is free from control by the marketplace platform as to where and when the marketplace contractor works and when the marketplace contractor accesses the marketplace platform’s digital network.
- The marketplace contractor bears all or substantially all of the contractor’s own expenses that are incurred by the contractor in performing the service or services.
- The marketplace contractor is responsible for providing the necessary tools, materials, and equipment to perform the service or services.
- The marketplace platform does not control the details or methods for the services performed by a marketplace contractor by requiring the marketplace contractor to follow specified instructions governing how to perform the services.
- The marketplace platform does not require the contractor to attend mandatory meetings or mandatory training.
The law also stipulates that this employment status analysis does not apply to required coverage under 26 U.S.C. § 3304(a)(6)(A) of the Federal Unemployment Tax Act, and when the marketplace platform is a state or local governmental entity, not-for-profit organization, or Indian tribe, the work must be deemed employment.
The law took effect April 29, 2019.
Read the code as published in the Texas Register