There is a significant difference between Texas workers who are labeled as independent contractors as opposed to employees. Independent contractors are generally responsible for paying their own taxes and finding their own insurance. They may also be required to take steps on their own to obtain payment for services rendered. However, unlike most employees, they are generally allowed to choose when and how they work.
As companies increasingly outsource work, the line between contractor and employee may not be as bright as it once was. For instance, Uber and Lyft classify their drivers as independent contractors despite the fact that their workers insist that they are employees. The basis for their claim lies mostly in their working conditions. Employers should be wary of incorrectly classifying their workers as doing so could result in large financial penalties.
Many lawsuits related to this issue have been filed in California, and Lyft paid a $27 million settlement in a case brought by 95,000 drivers. A $100 million settlement proposed by Uber was rejected by a North Carolina judge, and its drivers are now able to proceed with their own class action suit. As a general rule, a worker is an employee if he or she works more than 1,000 hours for a company in a given year or cedes control of working conditions to a company.
If an employee is incorrectly classified as an independent contractor, he or she may be entitled to overtime pay and other financial relief. If a worker who may have been an employee was denied benefits because of an incorrect classification, that person may be entitled to the monetary value of lost benefits. Depending on the circumstances of a case, it may be resolved through informal negotiations instead of a trial.