The federal Fair Labor Standards Act (FLSA) requires employers to pay all private, public and federal sector full-time and part-time employees the minimum wage for all hours worked. Presently, the minimum wage is $7.25/hour. One exception concerns tipped employees who can be paid less than the minimum wage, as long as the tips are enough to bring the hourly equivalent up to the minimum wage. Many States have laws that require the payment of a higher minimum wage, but Texas does not.

The FLSA also requires that Overtime (OT) be paid at a rate of 1.5 times an employee’s regular hourly wage for any time worked over 40 hours in a work week. The OT rule also applies to the payment of OT to salaried employees that work in excess of 40 hours in a given work week. Employees who are considered exempt from OT pay under the Fair Labor Standards Act (FLSA) typically include those in executive, administrative, and professional roles, as well as certain outside sales and computer-related positions. To be exempt, these employees must meet specific salary and duties tests outlined in the FLSA regulations.

The Texas Payday Act regulates how often you need to be paid, what can be deducted from your pay, how soon you need to be paid after you are terminated or resign, and how to enforce your rights. The Act is enforced by the Texas Workforce Commission (TWC).

If your employer fails to pay you the wages and/or commissions you are due, you may file a Wage Claim with the Texas Workforce Commission (TWC) or the U.S. Department of Labor, Wage and Hour Division. You have 180 days to file with TWC and two (2) years to file with the US Department of Labor. Under the FLSA, damages in a wage claim typically include back wages (unpaid minimum wage or overtime pay) and, in many cases, liquidated damages, which are essentially an equal amount of back wages awarded to the employee.

As an alternative to filing with the US Dept. of Labor or the TWC, you also have the right to file a “Wage Theft” lawsuit against your employer for violations of the FLSA and the Texas Payday Act.

Misclassification of Employees as Independent Contractors

The FLSA, the Texas Payday Act and other protections and benefits afforded to employees by federal and Texas laws do NOT apply to independent contractors.

What is the difference between an employee and an independent contractor? Generally, an employee is an individual who provides a service for wages, under the direction and control of a business owned by someone else. By contrast, an independent contractor is a self-employed individual who pursues an independent business and who is not subject to the direction and control of the employer.

It is up to your employer to classify you as an employee or independent contractor but that does not mean that their classification of you is correct. Many employers misclassify employees as independent contractors often to reduce costs. Misclassified employees miss out on benefits to which they are entitled, such as minimum wage, overtime, family and medical leave and unemployment insurance.

The US Department of Labor views the misclassification of independent contractors as a serious problem, As part of its efforts to address misclassification, the Wage and Hour Division on January 10, 2024 published a Final Rule, effective March 11, 2024, revising its guidance on how to analyze whether a worker is an employee or independent contractor under the FLSA. The Department’s new multi-factor test makes it much more difficult to classify workers as independent contractors under federal law. The new test weighs six factors equally. Under the test, each of the six factors will be considered equally: The degree to which the employer controls how the work is done; the worker’s opportunity for profit or loss; the amount of skill and initiative required for the work; the degree of permanence of the working relationship; the worker’s investment in equipment or materials required for the task; and, the extent to which the service rendered is an integral part of the employer’s business.

If you believe that your employer has misclassified your employee status, then you may file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS to research and return a determination on the correct employee classification. You may also file a complaint with the US Department of Labor, Wage and Hour Division and the Texas Workforce Commission.

If the IRS, the Department of Labor or the TWC determines that you were misclassified, they can order the employer to properly classify you and pay you any losses incurred as a result of the misclassification, including, benefits and overtime compensation. Additionally, an employee can file a private lawsuit to recover double the amount of back pay as actual and liquidated damages. Note that the consequences to your employer for misclassifying you as an independent contractor are significant as they will likely face fines, additional taxes and interest.

IRS Form SS-8 can only be submitted for an open tax year. To file a claim with the TWC, you have 180 days and two (2) years from the violation to file a claim with the US Department of Labor for unpaid wages, unless there is a willful violation on behalf of the employer where there is a three (3) year statute of limitations.

Contact Deborah, an experienced Wage and Hour and Misclassification Lawyer to set up an appointment to discuss your case.