Texas Independent Contractor Laws and Healthcare Staffing

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Written by Alexa Davidson, MSN, RN Content Writer, IntelyCare
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Reviewed by Aldo Zilli, Esq. Senior Manager, B2B Content, IntelyCare
Texas Independent Contractor Laws and Healthcare Staffing

Hiring independent nurse contractors can be a short-term solution for meeting patient demands without the cost and time associated with permanent training. However, this comes with risks, including the potential misclassification of workers as contractors when they are, in effect, acting more like employees. For facility leaders, understanding Texas independent contractor laws is essential because they define the factors used to classify workers, which can help employers to avoid misclassification investigations, lawsuits, and penalties.

As a facility leader, you may face situations in which staff needs to be sourced quickly. From fluctuating patient censuses and seasonal demand to unexpected nurse turnover, staffing needs can be unpredictable — and dire. To fill urgent needs, facilities commonly work with staffing firms that connect them with trained nursing professionals. Temporary nurses hired through agencies may function as 1099 independent contractors or as W2 employees. It’s important for employers to know the difference.

In this guide we’ll discuss how contract labor is classified under Texas labor laws. We’ll also break down key components of the relevant laws and give you examples of how these regulations may apply to your nursing staff.

Texas Independent Contractor Laws at a Glance

Maintaining compliance with Texas independent contractor laws helps avoid misclassification and legal implications that can impact your healthcare business. Here’s a breakdown of the relevant 1099 laws in Texas and how they might affect your facility.

Texas Independent Contractor Laws

Authorities

Texas Labor Code, Section 201.029 (covering temporary help firms)

Texas Labor Code, Section 214.008 (for employers that contract with governmental entities)

Key Definitions

Section 201.041: Employment is defined as a service performed for wages or under a contract, unless that performance is free from the control or direction of the hiring entity, as that would indicate an independent contractor relationship.

Section 401.012: An employee is defined as any person in the service of another under a contract of hire and includes those employed in the usual course and scope of the employer’s business.

Section 406.121: An individual is considered an independent contractor (IC) if they perform work for the benefit of another and are:

  • The employer of any employee that they hire.
  • Free to determine the manner and scheduling of their work.
  • Required to furnish the necessary tools, supplies, or materials to perform their work.
  • Appropriately skilled to specifically perform the work.

Section 201.011(20): A temporary employee is defined as one employed by a temporary help firm to be assigned to work for clients of the firm.

Section 201.011(21): A temporary help firm is defined as one that employs individuals for the purpose of assigning them to support or supplement a client’s workforce during absences, shortages, seasonal workloads, special assignments or similar situations.

Test

Under Section 201.029, a temporary help firm is considered to be the employer of any workers that they provide as staffing support to their clients, at least for purposes of unemployment compensation. However, there is the risk of a joint employment determination where the client of a temporary help firm could also be found to be a joint-employer if they “exercise enough of the attributes of an employer.”

In determining the attributes of employment, Texas does not use the “ABC” test like other states. Instead, Texas independent contractor laws weigh a mix of twenty different common law factors, which include:

  1. Instructions. ICs do not require instructions as to the details or methods of their work.
  2. Training. ICs use their own methods and don’t need to be trained.
  3. Integration. An IC’s services are normally separate and do not merge into the hiring entity’s business.
  4. Personally-rendered services. ICs can assign others to do the work in their place (an employee cannot).
  5. Hiring, supervising, and paying helpers. If ICs hire helpers for their work, the helpers are hired, supervised, and paid by the IC.
  6. Continuing relationship. ICs are usually hired to do one job and don’t have an expectation of continued work.
  7. Hours of work. ICs are the masters of their own time and can choose the days and hours when they work.
  8. Full time. ICs can’t be required to devote full-time service exclusively to one firm.
  9. Location of work. ICs typically work wherever they choose which can be away from a client’s premises.
  10. Order or sequence of work. ICs are focused on their end product and can set their own sequence of work.
  11. Oral or written reports. ICs are not usually required to submit oral or written reports during the progress of their work.
  12. Payment timeframes. ICs are normally paid by the job through either a negotiated flat rate or upon submission of a bid.
  13. Payment of expenses. ICs normally will pay their own business and travel expenses without reimbursement.
  14. Furnishing tools and equipment. ICs usually provide all the tools and equipment they need to perform a job.
  15. Significant investment. ICs often have a substantial investment in their own business.
  16. Realization of profits/losses. ICs can realize a profit or suffer a loss based on how they manage their revenues and expenses.
  17. Working for more than one client. ICs often work for multiple clients at a time and would not be subject to a non-competition rule.
  18. Publicly available services. ICs can advertise, carry their own business cards, or hold a separate business license.
  19. Right to discharge without liability. ICs that meet the terms of their contract cannot be fired; doing so can constitute a breach of contract.
  20. Right to quit without liability. ICs are legally responsible for the completion of a job; quitting beforehand can render them liable for breach of contract.

Enforcement

The Texas Workforce Commission (TWC) investigates and enforces employee misclassification and can charge fines for violations. For businesses contracting with the government, the TWC can impose a penalty for misclassification of independent contractors ($200 per individual not properly classified).

In addition to enforcement actions by the TWC, employers may also face lawsuits from misclassified employees claiming unpaid wages, overtime, and other costly damages.

Independent Contractor vs. Employee: Texas State Review

Texas independent contractor laws may increase the risk of employee misclassification for employers that hire contractor nurses. As an employer, ask yourself, are the initial savings worth the risk of financial loss due to potential misclassification claims?

The U.S. Department of Labor (DOL) implements and enforces federal labor laws, providing guidance on regulations and compliance for employers. Standards for minimum wage, overtime rates, recordkeeping, and child labor laws are set in the Fair Labor Standards Act (FLSA). Individual states have the authority to expand on federal regulations. Texas is no exception.

The Texas Workforce Commission (TWC) regulates and enforces labor laws in the state, including misclassification claims for temporary workers. Independent contractor laws in Texas are nuanced and use specific terminology that differs from other states and the federal government. One example is the term “temporary help firms,” which refers to staffing firms that connect businesses with temporary workers. Under the law, these firms are required, at a minimum, to act as the employers of their staffing workforce to protect independent contractor payment rights like unemployment compensation.

Texas Independent Contractor Test for Healthcare Facility Leaders

As a leader within your organization, you may be wondering if temporary 1099 nurses at your facility could be classified as your employees under Texas law. The state’s independent contractor test guides employers in maintaining compliance with employment taxes, regulations, and labor laws.

Texas independent contractor laws don’t include the ABC test commonly used in other states. Instead, state courts and agencies can determine employment status by looking at a mix of different common law factors, which are listed in the chart above.

Contract Labor Rules Applied to Nursing Professionals

For the Texas Workforce Commission, independent contractor test factors may have a unique application for healthcare facilities hiring nursing professionals. After all, many of the factors that describe an “independent contractor” would not clearly apply to nurses who operate in a highly regulated and supervised profession but are classified (possibly in error) as 1099 workers. We’ll look at four examples of how contract labor factors intersect with common nursing job duties.

These are just a few examples of issues that could arise when hiring an independent contractor nurse. Under a Texas’ independent contractor agreement, ICs are not supposed to be controlled like employees, but due to the nature of a nursing role, the line between the two can easily blur.

1. Location of Work

According to the IC factors, contractors typically have the right to choose the location of their work. However, nursing staff typically have to report to a specified location to contribute to a healthcare team.

2. Instructions

Under the IC factors in Texas, independent contractors don’t require instructions on the work they perform. In contrast, nurses regularly rely on instructions, such as direction from managers and charge nurses, in order to carry out their core nursing duties.

3. Training

ICs shouldn’t require training because they possess the skills necessary for a job. However, nursing jobs often require on-site training related to facility-specific protocols so that patient safety isn’t compromised.

4. Hours of Work

In Texas, ICs are in charge of their own schedule and can choose their days and hours of work. However, nursing shift times are typically set by a healthcare facility.

Additional Risks of Hiring an Independent Nurse Contractor

Employers also risk breaking Texas independent contractor laws with joint employment. In this scenario, the TWC or a state court could find that two or more entities share the responsibilities of an employer. Joint employment in healthcare usually involves a staffing firm and a healthcare facility. When both entities have the same level of control over a worker’s employment conditions (such as hours, location, or method of work), it can lead to shared legal responsibilities.

Joint employment can raise red flags for the TWC if a complaint is made about potential employee misclassification claims. This could prompt misclassification investigations into both healthcare facilities and the 1099 agencies that they use for staffing.

Is There a Way to Minimize the Risk of Misclassification?

Fortunately, facilities have options when it comes to staffing their shifts. If you have a need for temporary and flexible staffing, there are staffing agencies that hire their nursing professionals as W2 employees, instead of independent contractors. This means that the temporary nurses in your facility would have a clear employer of record responsible for verifying the credentials of their nursing team and providing the supervision, training, documentation, and support needed to comply with legal requirements and applicable standards of care.

Complete Your Team With W2 Nursing Professionals

Misclassification of healthcare employees can result in legal and financial liabilities for your healthcare organization. Fortunately, you can minimize your risk of violating Texas independent contractor laws by staffing your shifts with W2 nursing professionals who can deliver safe, supervised care to your patients.

 

Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current, as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.


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