Has anyone ever been visited by the Labor Board in Texas? If so what should you expect and what exactly are they looking for? I have some seasonal manual laborers workers that are set up as contract laborers because they work for 6 months or less then go back to mexico. Can you classify them as contract laborers or do they need to be set up as employees? If you do set them up as employees can you pay them a weekly salary or do they need to be hourly?

Under federal law (which is also applicable in TX), there is nothing that says a short time worker is something other then an employee solely because they are short term. I can give you a pointer to the federal DOL worker classification rules. TX-TWC rules while probably not identical to the federal rules are likely to be very similar. If the worker is legally an employee under the classification tests, then they must be treated as an employee even if they only work for one minute. This would include I-9 testing, new hire reporting and normal payroll tax reporting. While I cannot second guess TX-TWC, state auditors would mostly likely be interested in unpaid SUTA taxes, plus possibly WC (depending on how TX handles that). IRS should they get involved (and these folks generally talk to each other) would be interested in FICA/FIT/FUTA taxes.

Technically all workers are legally either "employees" or "independant contractor"s. The phrase "contract laborers" is not legally meaningful.

http://www.dol.gov/esa/regs/compliance/whd/whdfs13.pdf

FYI, Texas is the only state (I think) that doesn't require an employer to provide Worker's Comp insurance; however a notice must be placed where employees can see stating that they do not.

Here is the link to TX's independent contractor test:
http://www.twc.state.tx.us/news/efte/appx_e_twc_ic_test.html

You will see that it is not cut and dried by very dependent on the circumstances....each and every one.

Here is a link to an audit review sheet: http://www.twc.state.tx.us/news/efte/appx_b_tax_audits_rule_13s.html

We have had a wage audit, but have very few contractors. It went very smoothly. But I also hold the line on allowing our company to use contractors in employee positions. One of the major things I look for is in rule 17 and 18...that is do/could they do the same work for someone else in the same time period?

Also check out Section 4 at : http://www.twc.state.tx.us/news/efte/ui_law_coverage_issues.html#seasonalees ....it talks about making sure that migrant/seasonal workers have access to unemployment benefits. If they are contractors, they would not.

I suspect you will have a hard time convincing the auditors that these should not have been employees. Which means you will owe federal taxes (FICA, FUTA) and state taxes (SUI) and possibly late penalties and fees.

What an extraordinarily thorough set of responses. You people are GOOD!

If I may add a couple of small points. There is no "Labor Board" in Texas. Most aspects of the Texas Labor Code are handled by one or another part of the Texas Workforce Commission. The Labor Law Department handles claims of unpaid wages, and Child Labor issues. Wage issues are almost entirely complaint (or claim) driven.

The Tax Department handles tax and report filings, for franchise (business) tax, unemployment tax issues, and determinations of employment status--Employee v. Independent Contractor. Ditto to DAW's comments on contract labor. hr for me is spot on re: audits and how to avoid problems with them.

The Tax Department does not wait for a complaint to be filed.

Patty is correct (as always) about WC in Texas. By God, we'll lead the country in something, even if it's something strange. However, the self-insurance aspects of our WC laws are for real.

In another life, I fed at the public trough as a tax examiner, tax auditor, and manager with IRS. They take claims of misclassification of employees very seriously, and they do gather reports from States about payment of FICA and medicare taxes. If the employer doesn't collect and pay them, the feds often will, and then take it back from the employer. Mostly, they'll close a business for non-payment of employee taxes, if necessary. They have little sense of humor.

Thanks all of you for all your help. Your answers have been very helpful and I truly appreciate all of your time in answering them.

While I was researching some of the links you guys have posted. I came across form P-1 Reasonable Cause Affidavit by Payor for not obtaining Payee's Identifying Number. Could this form be applicable in my situation where I do have some workers who I've aslked multiple times for a social security card but still have not produced one? If they can't show a social security card and they can't be classified as independent contractors, then they should not be hired on. If they are already working do they need to be let go until they can come back with the correct documentation?

Texas 709 is right it's not the labor board it's the Department of Labor wage and hour division. Thanks for the clarification.

You cannot require specific indentification for the I-9 for employees. If the worker has a document from List A OR a document from both List B and List C, that appear valid on their face, they have provided acceptable proof of the right to work in the U.S.

After the worker has been hired, you can ASK to see a copy of the SS card and the employee must "provide it if it is available". It is by no means a document absolutely required to be viewed by law.

And, as Texas709 state, it's the Texas Workforce Commission. It's not called the Dept. of Labor in Texas.