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Despite Controversy, Texas Adopts Contractor Rules for the “Gig Economy”

After national attention all over the country about the problem of worker misclassification, the Texas Workforce Commission has approved a rule that allows online apps to classify their workers as contractors whether they would meet the legal definition of an employee under IRS rules. It’s a bit of a reversal from the commission’s previous position on worker misclassification.

As Construction Citizen has reported over the years, worker misclassification happens when certain employers designate their workforce as “independent contractors” with the intent of skirting employment taxes and benefits. This gives those companies a significant competitive advantage over employers who invest in their workforce and provide basic things like overtime pay, health insurance, and retirement benefits. 

On this new rule, the Houston Chronicle noted

The rule had became particularly controversial in recent months due to intense lobbying by Handy, an app for booking home cleaners and other home services. State lobbying disclosure records show that Handy, headquartered in New York, began lobbying the workforce commission in 2017 to classify workers who get hired for on-demand work through online platforms as independent contractors.

“The gig economy is quietly undermining a century of worker protections,” said Gary Warren of the Central South Carpenters Regional Council, a union for construction workers.

The Chronicle also notes that small businesses like "Maid Brigade" that do provide benefits for their employees will be undercut by the firms that do not invest in their workforce: 

Robert Moser, for example, employs about 60 at his Maid Brigade cleaning service franchise in Houston. His company provides health insurance, paid vacation and an occupational accident policy, all costs that app-based services can avoid if they classify workers as independent workers. He fears the lower costs would allow the tech companies to undercut his prices and his business.

“If they don’t have any overhead, they can charge a lower hourly rate, by a lot,” Moser said. “If we can get the customer on the phone, we can explain and justify (our prices), but not all customers understand. If it’s two-thirds the cost, they’ll say, ‘I will go with them.’”

How did the workforce commission come to do this in the first place? Well the Texas Observer reported that “the public and elected officials were kept in the dark about Handy’s direct role in drafting the rule for well over a year. That’s because the two lobbyists working for the New York-based cleaning and maintenance company, Jerry Valdez and Mackenna Wehmeyer, didn’t disclose Handy as a client in lobbyist registrations for three years, as required by state law. The commission also initially denied using outside sources. Only after the lobbyists’ work for Handy was reported by the Observer did they finally disclose Handy as a client.

Following the public revelations last month, Handy, Tusk and a spokesperson for the Texas Workforce Commission all explicitly denied they did anything wrong. Meanwhile, the lobbyist at the center of it all, Valdez, has maintained radio silence despite multiple attempts by the Observer to contact him through different channels.”

Their full from the Observer is here