Texas Employment Law Basics for Employers: Avoiding Illegal Workers

You will be required to complete an I-9 form and other state-approved forms to report each new employee in Texas’ “new hire directory” (maintained by the Texas Workforce Commission) within twenty (20) days of that employee’s start date. This process will help ensure that your employees are eligible to work in the U.S., and is also used to track and collect social security, federal income taxes and other government-authorized deductions from that employee’s paychecks.

The confirmation process is usually pretty straightforward, but issues sometimes occur. For example, you’ve hired a new employee, but he or she refuses to disclose their social security number or claims not to have one. What should you, the new employer, do in this situation?

According to the U.S. Department of Homeland Security, you cannot legally require that the employee disclose their social security number (SSN). Although a social security card is the most common method of demonstrating that the employee is eligible to work in the United States, it is not the only method for proving eligibility.

This causes some problems for the new employer in Texas. You will be required to complete a “new hire” report form on which you must provide the employee’s SSN. Although there is little guidance from the various federal and state agencies, it appears that you may be able to avoid compliance issues by submitting an affidavit stating that the employee does not have an SSN or refuses to provide it.

You and the employee should each complete a Form P-1 (a privately-prepared form captioned the “Reasonable Cause Affidavit by Payor for Not Obtaining Payee’s Identifying Number”) which you can find via a quick internet search. Refusal by the employee to complete this form, in addition to his or her refusal to provide an SSN, may be grounds for termination. In addition, courts have stated that an employer is not required to hire someone who refuses to provide an SSN on his or her job application.

If this situation occurs, please consult with someone well versed in employment law to determine what rights and obligations/liabilities you may have as the new employer.

By: Cynthia W. Veidt, attorney

Texas Employment Law Basics for Employers: Hiring – Employees or Independent Contractors?

Many employers would prefer to consider their workers to be “independent contractors” rather than “employees.” Using independent contractors reduces payroll taxes and tax reporting requirements, provides some measure of insulation from potential liability, and eliminates the need to provide employee benefits. However, you should be very careful; simply calling someone an “independent contractor” will not protect you from potential liability. 

With increasing frequency, employers have found themselves on the wrong end of an investigation by state or federal agencies which determined that their workers do not meet the legal test to be considered independent contractors. Those employers must pay back taxes, penalties, and interest related to their newly-designated employees.

There is a test with about twenty (20) factors used by the government and Texas courts when determining whether someone is an independent contractor. It’s a very fact-specific analysis, in other words – it depends on each individual situation. But in general, a true “independent contractor” works independently of the employer’s control, and is usually able to work for more than one employer at any given time. If you dictate when, where and how the work is to be performed, you set the hours of work, you require full-time devotion to your business, and the worker has no ability to work for others in the same field of competition, you probably have an “employee.” 

By: Cynthia W. Veidt, Attorney