Anchía Bill Fines Contractors $100 Per Misclassified Construction Worker

The text as introduced · 942 words

90R1662 RDS-F

By: Anchía
H.B. No. 861

A BILL TO BE ENTITLED

AN ACT

relating to the classification of certain construction workers and

the eligibility of those workers for unemployment benefits;

providing an administrative penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 201, Labor Code, is

amended by adding Section 201.079 to read as follows:

Sec. 201.079. SERVICE BY INDEPENDENT CONTRACTOR IN

CONSTRUCTION. (a) In this section, "construction" has the meaning

assigned by Section 301.221.

(b) In this subtitle, "employment" does not include

construction performed by an individual as an independent

contractor.

SECTION 2. Chapter 301, Labor Code, is amended by adding

Subchapter M to read as follows:

SUBCHAPTER M. CLASSIFICATION OF INDIVIDUAL EMPLOYED IN

CONSTRUCTION

Sec. 301.221. DEFINITIONS. In this subchapter:

(1) "Construction" means work related to the erection,

improvement, alteration, repair, renovation, maintenance, or

remodeling of a building, structure, appurtenance, road, highway,

bridge, dam, levee, canal, jetty, or other improvement to or on real

property, including moving, demolishing, dredging, shoring,

scaffolding, drilling, blasting, and excavating real property.

(2) "Contractor" means a person who contracts to

perform construction.

(3) "Employee" has the meaning assigned by Section

61.001.

Sec. 301.222. APPLICABILITY. (a) An individual may not be

considered an employee based solely on the fact that the person for

whom the individual is providing construction services requires

that any employee hired by the individual must:

(1) submit to a criminal background check or

preemployment drug screening; or

(2) possess a certain license or certification

relating to the work the employee will perform.

(b) A person for whom an individual is providing

construction services is not required to report to the commission

under Subtitle A that the individual is an employee of the person if

the person:

(1) shows that the individual is an independent

contractor;

(2) provides to the individual an Internal Revenue

Service Form 1099, or a similar form issued by, or that meets the

compliance guidelines of, the Internal Revenue Service, on which

the person reports the amount paid to the individual in accordance

with Internal Revenue Service requirements; and

(3) files the form described by Subdivision (2) with

the Internal Revenue Service in accordance with Internal Revenue

Service requirements.

(c) This subchapter does not apply to services performed by

an individual in the employ of:

(1) a state, a political subdivision of a state, or an

Indian tribe or an instrumentality of a state, political

subdivision of a state, or Indian tribe that is wholly owned by one

or more states, political subdivisions, or Indian tribes, provided

that the services are excluded from employment as defined in the

Federal Unemployment Tax Act (26 U.S.C. Section 3301 et seq.)

solely because of Section 3306(c)(7) of that Act; or

(2) a religious, charitable, educational, or other

organization, provided that the services are excluded from

employment as defined in the Federal Unemployment Tax Act (26

U.S.C. Section 3301 et seq.) solely because of Section 3306(c)(8)

of that Act.

Sec. 301.223. EMPLOYEE STATUS. A contractor shall properly

classify each individual providing construction services as either

an employee or an independent contractor in accordance with

commission rules.

Sec. 301.224. INFORMATION REGARDING COMPLAINTS. The

commission shall provide on its Internet website information

regarding the procedure for the public to report violations of this

subchapter.

Sec. 301.225. ADMINISTRATIVE PENALTY. (a) The commission

may impose an administrative penalty on a contractor who violates

Section 301.223. The amount of the penalty may not exceed:

(1) $100 for each individual who is not properly

classified; and

(2) $1,000 for each individual who is not properly

classified for each subsequent violation that occurs after the

imposition of a penalty for a prior violation.

(b) Any penalty issued under this section applies to a

successor business entity that:

(1) has one or more owners who jointly control at least

50 percent of the:

(A) original employer; and

(B) successor business entity; and

(2) is engaged in the same or similar business

activity.

(c) An administrative penalty imposed under this section

shall be imposed in the same manner as the commission imposes an

administrative penalty under other law.

Sec. 301.226. NOTIFICATION TO GOVERNMENTAL ENTITY. If the

commission determines that a contractor has violated this

subchapter, the commission shall provide notice of the violation to

each governmental entity that the commission reasonably believes

has received construction services provided by the contractor. The

notice must identify the contractor and, for each violation,

specify the type of service provided and the location at which the

service was provided, if known to the commission. In this section,

"governmental entity" has the meaning assigned by Section 406.096.

Sec. 301.227. ANNUAL REPORT. The commission shall issue an

annual report regarding compliance with and enforcement of this

subchapter. The report must include:

(1) the number of complaints received from the public;

(2) the number of investigated complaints and any

resulting findings; and

(3) the amount of unemployment taxes, interest,

administrative penalties, and fines actually collected as a result

of:

(A) violations of this subchapter; or

(B) the exclusion of construction performed by an

individual from the application of Subtitle A, unless the services

are excluded by application of Section 201.079.

SECTION 3. The change in law made by this Act applies only

to a claim for unemployment compensation benefits that is filed

with the Texas Workforce Commission on or after the effective date

of this Act. A claim filed before the effective date of this Act is

governed by the law in effect on the date the claim was filed, and

the former law is continued in effect for that purpose.

SECTION 4. This Act takes effect September 1, 2027.