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Advisory on “Gig Workers” in Texas Featured in Employee or Independent Contractor?

Employee or Independent Contractor?

Employee or Independent Contractor? recently featured an Act Now Advisory titled “Texas Rule on “Gig Workers” Takes Effect,” co-authored by Susan Gross Sholinsky, Greta Ravitsky, Kevin R. Vozzo, and Christopher R. Shur.

Following is an excerpt:

The Texas Workforce Commission (“TWC”), the agency responsible for administering unemployment benefits and assessing unemployment taxes, recently adopted a rule (“Rule”) pursuant to which certain workers who provide services through app-based businesses and websites cannot be considered “employees” for unemployment insurance purposes.

Historically, the TWC used a 20-factor test to differentiate between employees (who are eligible for unemployment insurance benefits) and independent contractors (who are not). The 20-factor test focuses on the nature and extent of control that the putative employer exercises over the worker. Under the Rule, “marketplace contractors” who provide services for third parties through a “marketplace platform” are not employees of the marketplace platform—irrespective of their status under the 20-factor test, so long as the required conditions are satisfied.

The TWC has characterized the Rule, approved by a 2-1 vote, as its response to a changing workplace. Although the TWC will continue to evaluate eligibility for unemployment insurance benefits on a case-by-case basis, opponents of the Rule argued that it might incentivize companies to transition to an app-based platform to avoid state unemployment taxes. The TWC countered that the mere existence of a website would not automatically confer marketplace contractor status.

Read the full Advisory here.