Employee or Independent Contractor? Getting It Right in Texas

Paying workers as independent contractors can look simpler and cheaper. No payroll taxes, no overtime, no unemployment insurance. But the label on a contract does not decide the question. If a Tyler business treats a worker like an employee, government agencies and courts will too.

Control Is the Key Question

The IRS, the U.S. Department of Labor and the Texas Workforce Commission all look at how much control the business has over the work. Do you set the hours, provide the tools, train the worker and decide how the job gets done? Those facts point toward employee status. A true contractor controls the method, uses their own tools, can work for others, and takes on the risk of profit or loss.

The Cost of Misclassification

Misclassified workers can lead to back payroll taxes, unpaid overtime under the Fair Labor Standards Act, unemployment tax assessments from the Texas Workforce Commission, penalties and interest. A single unemployment claim from a former “contractor” can trigger a broader audit.

Best Practices

• Use a written independent contractor agreement that reflects how the relationship actually works.
• Pay contractors by the project or invoice, not on a regular payroll schedule.
• Collect a W‑9 and issue a 1099 when required.
• Review roles periodically, since a relationship can change over time.

When in Doubt, Get Advice

Some roles are clear. Many are not. Reviewing your arrangements now costs far less than responding to an audit. See also why every Tyler employer needs a handbook.

Frequently Asked Questions

Does a signed contractor agreement protect me?

It helps, but agencies and courts look at how the relationship works in practice. If you control the work like an employer, the agreement will not save the classification.

Can a worker be both an employee and a contractor?

A person can hold separate roles, but it is risky when the duties overlap. Get advice before paying the same person both ways.

Talk With a Tyler Attorney

Want your worker classifications reviewed? Learn about our employment law services for employers. Call Lindsey Birdsong, PC at (903) 595‑6297 or visit our contact page. Our office is at 2307 Dueling Oaks Drive, Suite 103, in Tyler.

This article is general information, not legal advice. Talk with an attorney about your specific situation.