A Few “Factors” to Consider

Should a Subcontractor be allowed to assign, sell, or otherwise transfer (factor) an account receivable due from a general contractor for work performed on a construction project? We say, absolutely not. Here’s the problem.

Construction funds are trust funds. Texas Property Code §162.001(a) (commonly referred to as the “Trust Funds Statute”). Even loan receipts are trust funds. Texas Property Code §162.001(b).

A contractor, subcontractor or owner, or an officer, director, or agent of a contractor, subcontractor, or owner, who receives trust funds or who has control or direction of trust funds, is a trustee of the trust funds. Texas Property Code §162.002.

An artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property is a beneficiary of any trust funds paid or received in connection with the improvements. Texas Property Code §162.003.

A general contractor is a trustee of construction funds paid to it by the owner. A subcontractor would be a beneficiary of the trust funds paid to the general contractor in connection with the improvements at the project. In turn, once paid, the subcontractor becomes a trustee.

A trustee who, intentionally or knowingly or with intent to defraud, directly or indirectly, retains, uses, disburses, or otherwise diverts trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries of the trust funds, has misapplied the trust funds. Texas Property Code §162.031.

A trustee who misapplies trust funds amounting to $500 or more in violation of Chapter 162, with intent to defraud, commits a felony of the third degree. Texas Property Code §162.032 (b). If the misapplication of trust funds by a trustee constitutes another offense punishable under the laws of this State, the State may elect the offense for which it will prosecute the trustee. Texas Property Code §162.033.

Under Section 9.406 of the Texas Business and Commerce Code, once the account debtor (General Contractor) receives notification of the assignment of an account (invoice), the account debtor cannot discharge its obligation by paying the assignor (Subcontractor). After receipt of the notification, the account debtor (General Contractor) may discharge its obligation only by paying the assignee (Factor Company).

This situation results in a legal paradox.

1. On the one hand, Subcontractor has relieved itself from the implications of the Trust Fund Statute. Subcontractor is no longer receiving “trust funds” for its services provided at the construction project. It is receiving funds for the work from a third source, Factor Company. After receipt of these funds, Subcontractor can “retain, use or disburse” those funds any way it chooses without worry of the implications imposed by the Trust Fund Statute.

2. Factor Company would argue that it is not a Trustee, subject to the Trust Fund Statute. Thus, after receiving payment of trust funds from the account debtor, it does not have to pay any beneficiaries of Subcontractor.

3. On the other hand, General Contractor is required to pay Subcontractor under the Trust Fund Statute. If General Contractor pays Factor Company, General Contractor, its owners, or officers, or directors face potential criminal liability. Further, if General Contractor pays Factor Company, and Factor Company does not pay Subcontractor beneficiaries, the project is subject to lien. If General Contractor does not pay Factor Company, then General Contractor is subject to liability under Section 9.406 of the Texas Business and Commerce Code.

By factoring the accounts receivable, Factor Company, Subcontractor, its owner or officers, and directors have circumvented the trust fund statute, is not a trustee, and thus can use those funds for any purpose thus avoiding a criminal penalty. This unintended result cannot be tolerated in the construction setting.

Keeping an owner’s construction project property free and clear of liens is a constant concern for general contractors. Because subcontractors typically purchase materials to be incorporated into the construction project from third parties, it is important that the flow of funds from the owner to the general contractor to the subcontractor make their way to the suppliers to prevent liens filed by these outside third party suppliers. If a subcontractor were allowed to assign (factor) its account receivable due under a construction contract, and if payment would have to be made to the assignee, how would the assignor’s (subcontractors) suppliers, materialmen, and laborers be paid to prevent liens?

It could be argued that Subcontractor could (and should) pay the funds it receives from the factor to the beneficiaries. However, in the real world that does not happen. That’s why we have the Trust Fund Statute. It is for these reasons that the factoring, sale, or assignment of a right to payment under a construction contract for construction or repair of an improvement on specific real property in this State be declared void as against public policy. A seemingly legal means to avoid criminal prosecution should not be tolerated and in the interest of public policy should be invalidated and voided.

Good News for Owners of a Construction Project? We think so!

On May 8, 2015, the Texas Supreme Court, in a case of first impression, interpreted Chapter 95 of the Chapter 95 of the Texas Civil Practice and Remedies Code, which relates to limitations on a property owner’s liability for injury, death, or property damage to an independent contractor while constructing, repairing, renovating, modifying, or improving the real property.

In the case of Abutahoun v. The Dow Chemical Company, the Supreme court held that Chapter 95 applies to independent contractors’ claims against property owners for damages caused by negligence when those claims arise from the condition or use of an improvement to real property where the independent contractor constructs, repairs, renovates, or modifies the improvement. In so finding, the Court held that Chapter 95 limits property owner liability on claims for personal injury, death, or property damage caused by negligence, including claims concerning a property owner’s own contemporaneous negligent activity.

In this case Dow Chemical contracted with Win–Way Industries to install insulation on a system of pipelines at Dow’s facility in Freeport, Texas. Robert Henderson was a Win–Way employee, and he assisted with the insulation work. Dow’s Freeport facility contained thousands of pipes in a pipeline system that ran throughout the facility. While working for Win–Way on the asbestos-insulated pipeline system Henderson was allegedly exposed to asbestos dust by Dow employees who were installing, sawing, and removing asbestos insulation nearby. He was also allegedly exposed to asbestos dust as a result of his own direct contact with the insulation products.

Eventually, Henderson was diagnosed with mesothelioma, and he and his wife, Tanya, sued Dow and over a dozen other defendants, alleging under various negligence and product liability theories that the defendants were responsible for Henderson’s injuries due to asbestos exposure. The jury returned a verdict in which it found that Dow’s negligence proximately caused Henderson’s injuries, and that Dow was 30% responsible for causing Henderson’s injuries. Based on the jury verdict and several adjustments, the trial court rendered judgment against Dow for $2.64 million plus interest and court costs.

Dow appealed the verdict and argued that Chapter 95 does not distinguish between a property owner’s liability for exposure caused by the activities of contractors and their employees and exposure that the property owner’s own employees’ activities caused. Further, Dow argued that Chapter 95 applied to bar all of the Hendersons’ negligence claims because the Hendersons did not establish that Dow had both control over Robert Henderson’s work and actual knowledge of the dangers of asbestos exposure as Chapter 95 requires. The Hendersons argued that Dow could not “avail itself of the heightened protections afforded by Chapter 95” because their claims against Dow were “based solely upon the negligent activities of Dow employees, and not from injury arising from the condition or use of an improvement of real property of Henderson.

The court of appeals agreed with Dow’s interpretation of the statute. The court of appeals reversed the trial court’s judgment and rendered a take-nothing judgment in favor of Dow, holding that Chapter 95 applied to the Hendersons’ claims against Dow. The Hendersons filed a petition for review to the Supreme Court, which was granted. The Court affirmed the Court of Appeals that the Hendersons take nothing.

The heart of Chapter 95 are sections 95.002 and .003, which establishes Chapter 95’s applicability, and limitations on a property owner’s liability for personal injury, death, or property damage to independent contractors, respectively.

Regarding applicability, section 95.002 states that Chapter 95 “applies only to a claim.” A “claim” is specifically defined as “a claim for damages caused by negligence.” Section 95.002 then explains that Chapter 95 applies only to a claim for damages caused by negligence:

(1) against a property owner, contractor, or subcontractor for personal injury, death, or property damage to an owner, a contractor, or a subcontractor or an employee of a contractor or subcontractor; and
(2) that arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement.

Section 95.003 establishes the limitations on a property owner’s liability for a claim to which Chapter 95 applies, and states:
A property owner is not liable for personal injury, death, or property damage to a contractor, subcontractor, or an employee of a contractor or subcontractor who constructs, repairs, renovates, or modifies an improvement to real property, including personal injury, death, or property damage arising from the failure to provide a safe workplace unless:

(1) the property owner exercises or retains some control over the manner in which the work is performed, other than the right to order the work to start or stop or to inspect progress or receive reports; and
(2) the property owner had actual knowledge of the danger or condition resulting in the personal injury, death, or property damage and failed to adequately warn.

In short, a property owner is not liable for personal injury or death to a contractor, subcontractor, or employee of a contractor or subcontractor, while constructing, repairing, renovating, modifying, or improving the real property.

However, when a claim does not arise from a condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement, Chapter 95 does not apply. In such a case the independent contractor or subcontractor can recover in common law negligence.

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Charles E. Lobb, Jr. is a founding partner of Murray | Lobb, PLLC. Mr. Lobb focuses his practice in construction law and has authored and spoken at Construction Law Seminars. Should the situation arise he may be contacted at 281-488-0630 or at lobb@murray-lobb.com

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Is Notice to the Address of Record in the Loan Agreement always Sufficient? We'll See…

Many years of past precedent had established that a lenders notice to the debtor’s address of record in the Loan Agreement was almost always sufficient. However, one case from the Texas Supreme Court, and another in which Petition for Review has been filed may change established law.

In July 2015, in a landlord verses tenant case, (“Katy Venture v. Cremona Bistro”) the Texas Supreme Court ruled that because the landlord had used an outdated “registered” address even though it knew of a new “unofficial” mailing address, a fact issue was presented to defeat Landlord’s Motion for Summary Judgment in a bill of review proceeding after default judgment was entered against the Tenant.

Following the “Katy Venture” decision, the Fort Worth Court of Appeals, in a Lender verses Guarantor case, the Court held that the Guarantor raised a genuine issue of material fact to defeat a summary judgment. The Court held that because some summary judgment evidence exists that the Bank knew the Guarantor’s current address but nonetheless utilized an outdated “official” address in its certificate of last known address, a fact issue exists precluding summary judgment. This is true even assuming the Bank conclusively established the Guarantor’s negligence in failing to update his contractually-agreed-to address for notice.

Petition for review has been filed to the Texas Supreme Court. We’ll see in the coming year how the law of adequate notice evolves.

Practice point: Send notices to the borrowers and guarantors “official” address of record, but also send notice to ay other addresses which the bank knows, or with reasonable diligence and investigation should have known, where the borrowers and guarantors receive their mail or reside.

Do Builders have Protection from Construction Defects?

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If you’re a builder who is hired by a lender after foreclosure to complete a home and are worried about prior construction defects, fear not, Texas law protects you. Section 59.011 (c) of the Texas Finance Code provides that a builder hired by a lender to complete the construction of a foreclosed home is not liable for any construction defects of which the builder had no knowledge that existed prior to the acquisition of the home by the lender.

However, the builder is subject to the Texas Residential Construction Act found in Chapter 27 of the Texas Property Code for the work it performed for the lender after acquisition of the home by the lender.

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This makes perfect sense and in laymen terms: a builder is not liable for the work done by another but is liable for his own work.

Get Ready for the New Overtime Rule

May 18, 2016 – The U.S. Department of Labor has released its final rule on overtime under the Fair Labor Standards Act. The Administration estimates that the new rule will extend overtime protections to 4.2 million Americans who are not currently eligible under federal law. Once effective, the rule will raise the salary level from its previous amount of $455 per week (the equivalent of $23,660 a year) to $913 per week (the equivalent of $47,476 per year) in 2016. The rule will also raise the compensation level for highly compensated employees from its previous amount of $100,000 to $134,004 annually. The final rule also establishes a mechanism for automatically updating the salary level every three years, with the first update to take place in 2020. These changes take effect on December 1, 2016. The Final Rule can be viewed here: https://www.dol.gov/whd/overtime/final2016/

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The final rule does not make any changes to the duties test for executive, administrative and professional employees, which affects the determination of who is exempt from overtime. Administrative employees who do not meet the special provision for administrative employees will be eligible for overtime if they earn below the salary level set in the final rule and they work more than 40 hours in a week.

In response to the new overtime rule, employers have the option of:

A. Paying time-and-a-half for overtime work;

B. Raising the workers’ salaries above the new threshold;

C. Limiting worker’s hours to 40 per week; or

D. Some combination of the above.

“Series, LLC” -The Next Generation of Asset Protection for Investors

A series limited liability company allows a traditional limited liability company to separate into an unlimited number of multiple parts or “cells” with the establishment of one or more series of members, membership interests, managers, or assets – each a series – and each series is essentially treated like its own limited liability company (“LLC”). Currently, only the following states have statutes authorizing some form of series LLCs: Alabama, Delaware, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Utah, Wisconsin and Texas. Texas enacted its statue in 2009 and it can be found in the Texas Business Organizations Code (“TBOC”), title 3, subchapter M, sections 101.601 – 101.621.

Typically, each series (i) owns its own assets and has its own liabilities; (ii) has the availability to have different members, managers and types of membership interests; (iii) has the ability to sue and be sued; (iv) can have its own business purpose; (v) has the ability to contract in its own name; and (vi) can grant a security interest in its own name.

Generally, the debts, liabilities, losses, obligations, and expenses of one series will not be enforceable against another series’ assets or the assets of the “parent” limited liability company. This makes it a viable option for any business where it is desirable to separate assets or business lines into distinct entities, such as investment companies, real estate development companies, oil and gas companies and licensing or regulatory companies. The TBOC provides that in order for the liability shield to exist three requirements must be satisfied: (i) the certificate of formation of the main LLC must contain a “notice provision”, which references the liability protection provided for by TBOC section 101.602(a); (ii) the company agreement of the main LLC must contain a statement setting forth the liability protection provided for by TBOC section 101.602(a); and (iii) records must be maintained for each series that “account for the assets associated with that series separately from the other assets of the [parent LLC] or any other series”.

One of the great benefits of series LLCs are the cost savings related to organizational filing fees. In Texas, the filing fee to create a series LLC is the same as an individual LLC; $300.00 (non-expedited). Thus, to create six LLCs would be a minimum cost of $1,800.00 versus the cost of creating a series LLC of $300.00. Oftentimes, series LLCs may also result in lower legal costs as it reduces the need for separate operating agreements and some document preparation.

While there are still issues to be considered when determining whether a series LLC might be right for a particular business, series LLCs are growing in popularity and are an additional tool in any investor’s or businesses’ proverbial toolkit.

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Labor Day: A Celebration of The American Worker

As youngsters everywhere return to the classroom, and we all bask in the waning glow of summer, it is worthwhile to take a moment to reflect upon the history of and reasons behind the existence of Labor Day. Far more than just an opportunity to fire up the grill, lounge poolside or hit the links, Labor Day is a time to celebrate the economic and social achievements of the American worker. This year, we at Murray-Lobb urge you to take a moment and consider the monumental contributions that legions of workers have made and continue to make to our nation’s economy, defense and overall prosperity.

Gradual Evolution of the Holiday

The history of Labor Day in America differs somewhat from other federal holidays, in that it took shape in a rather piecemeal fashion. During the 1800s, it was customary for workers’ groups to hold picnics, parades and other large assemblies as a means to demonstrate support for issues affecting laborers. Rallies were routinely held as a means to advocate for shorter working hours or to call for wage strikes. However, in terms of the creation of a singular national holiday celebrating workers, it is often a particular gathering on September 5, 1882, in New York City which gets the credit.

The late 19th century was a time during which the labor movement in America was gaining real steam. New York’s Central Labor Union amassed power by linking many smaller unions into one large advocacy force. In May of 1882 it was proposed that all of the unions gather together in early September for a massive festival. After months of planning, the workers were set to congregate at what was then the largest park in the city on the appointed September day.

Though the planned parade got off to a slow start, crowds of laborers began to arrive, and the event ultimately drew thousands. Music, beer, food, dancing, fireworks and inspirational speeches from union leaders all combined to create a memorable day for those involved. In the end, major newspapers deemed the assembly an utter success, and each subsequent year brought more and more similar events to cities across the country.

Federal Recognition of Labor Day

Over time, localities from coast to coast began to emphasize the importance of honoring the nation’s labor force, with local municipalities being the first to pass ordinances creating official observances. These developments led to initiatives calling for similar action on the state level, with Oregon being the first to pass such legislation in 1887. Very quickly, four additional states established Labor Day as a statewide holiday. By 1894, well over 20 states had created such a holiday, and in June of the same year, the United States Congress passed its own legislation decreeing that the first Monday in September would henceforth be a federally recognized holiday known as Labor Day.

Celebrating America’s Labor Force

Though it is easy to focus primarily on squeezing in a last bit of summertime fun before fall descends upon us, it is important not to overlook the underlying reason for Labor Day’s existence. America’s labor force, past and present, has been a vital factor in the creation of an economic powerhouse the likes of which the world has never seen. At Murray-Lobb, we hope you will take some time this holiday weekend to contemplate the incomparable achievements of the American workforce and pay tribute to the countless contributions laborers have made to the establishment of our robust way of life as well as our political democracy. In the ever-astute words of the Greek dramatist Sophocles, “without labor, nothing prospers.”

Crafting Effective Social Media Policies for Educational Entities

The reach of social media into nearly every facet of our lives, including those of our children, shows no sign of slowing. While the potential of these resources to enhance the educational experience can be considerable, it is equally important for safeguards to be put in place to protect against the pitfalls they simultaneously present. As a result, school districts, colleges and other educational entities are under increased pressure to craft social media policies and guidelines that balance the interests and rights of all stakeholders while keeping vulnerable parties out of harm’s way. With significant experience advising school administrators, employees, parents and students at all levels, the attorneys at Murray-Lobb possess the knowledge required to create and refine effective social media policies for use in the educational arena.

Widespread Need for Guidance

Considering how pervasive social media tools are in our everyday lives, many would be surprised to learn just how many school districts, colleges, universities and other educational bodies have yet to put formal policies or guidelines in place to govern their use. While official board or institution-wide policies may not be critical in every educational context, it makes good sense for school administrators to give serious consideration to putting some concrete rules into writing. Whether promulgated in a handbook or through an amendment or addition to existing policy, a clear articulation of what is acceptable and what is not in the realm of social media usage helps protect the rights, privacy and safety of all involved.

Many school districts have put in place draconian penalties for students who are caught using their cell phones at “unauthorized” times, essentially during class instruction. The administrators typically collect the cell phone and will only release it to a parent or guardian and require the payment of a $15 or more fine. The time has come for school districts and other educational bodies to recognize the usefulness of such social media tools as educational tools and to craft more flexible policies.

Key Issues in School Social Media Policy Drafting

To ensure that a school district’s social media policy achieves the desired effect, it is wise to address several key issues that are almost certain to arise in the educational setting. While it is likely impossible to design a policy able to anticipate every problem that may emerge, having specific guidelines in place will make handling misconduct an easier and more straightforward task when the time comes.

First, it is necessary to determine what, if any, types of relationships district employees will be permitted to have with students or their families via their personal social media accounts. Some districts have placed no restrictions on such relationships, whereas others have attempted to issue blanket prohibitions on such communication. The latter option, however, may give rise to challenges of a constitutional nature, with opponents citing unfair infringement on free speech rights. Therefore, a district may choose to focus its guidance on strongly discouraging excessive (or any) personal interaction between students and teachers on social media rather than banning it or attempting to police and punish it when it becomes problematic. Personal emailing or texting between school district employees and students has exacerbated the number of incidents of inappropriate relationships between such employees and students because of the ease of conducting such relationships clandestinely. Many school district employees do not realize that even if those relationships are consensual, the school district employee may still be charged with a felony and lose his or her educational career entirely.

Personal use (or misuse) of social media by school employees is just one of the ways in which a lack of clear guidelines can prove troublesome for administrators. The use of social media for legitimate, educational purposes can jeopardize districts in often unanticipated ways, including placing them at risk of intellectual property infringement lawsuits. Trademark and copyright litigation is a legitimate concern when educators make unauthorized use of protected instructional or other content via social media accounts. Therefore, it is vital that employees are thoroughly informed and trained about the risks in order to prevent costly and cumbersome legal trouble down the road.

An especially prickly area of social media policy in the educational context is the issue of when employees or students can be sanctioned for conduct on personal social media accounts undertaken outside of work or school hours. To develop an effective approach to handling such circumstances, it is necessary for administrators and board members to carefully consider the First Amendment rights of district employees and students and to provide training opportunities and concrete factual examples to help everyone engage in responsible social media use that does not jeopardize the safety or integrity of the organization and those it serves.

Maintenance of district or entity-wide social media accounts can also pose difficulties if not handled pursuant to formalized, established policies. For example, a public educational body with its own Twitter or Facebook page may be tempted to delete unflattering or disparaging comments made by a member of the public on those sites. However, its ability to unilaterally delete or disguise such remarks can be in question if no guidelines have been issued or presented to those visiting the site. As is the case in all of the scenarios described above, thorough legal review of proposed policies and the rationales behind them is essential to success.

Experienced Counsel for Texas Educators and Administrators

As the start of the new school year rapidly approaches, school districts, colleges and other governmental bodies are encouraged to undertake a comprehensive review of the manner in which they handle issues relating to social media use. The legal exposure that can result from ambiguous or nonexistent policies is significant, and securing the counsel of a seasoned education law attorney is essential. With broad experience serving the needs of Montgomery, Galveston and Harris County educators, administrators, parents and students, Murray-Lobb stands ready to provide the knowledgeable advice and practical solutions our clients deserve.

Making the Critical Distinction Between Employee and Independent Contractor

Among the thorniest concerns facing Texas business owners, large and small, is the issue of whether they are properly classifying certain types of workers as employees or independent contractors. As there are clear advantages to designating individuals as independent contractors, some businesses are deliberately making incorrect classifications, whereas others are making these errors inadvertently and subjecting themselves to onerous penalties and fines. The attorneys of Murray-Lobb regularly advise business clients on properly classifying workers in order to remain in full compliance with the U.S. Department of Labor, the IRS and the Texas Workforce Commission, and we offer the following guidance to help illustrate the potential pitfalls.

Common Reasons for Misclassification

The benefits of designating a worker as an independent contractor as opposed to an employee are many. An employee will potentially be eligible for federal and state minimum wage, overtime, unemployment insurance and worker’s compensation benefits. They will also require necessary equipment, training and supervision, all things thatcan prove costly to employers. In contrast, independent contractors will be entitled to none of those expensive benefits and will require little to no additional training. Therefore, it is easy to see why many employers frequently select this classification, even if it is arguably inaccurate when applied to the facts at hand.

There can be serious consequences when a business fails to correctly classify workers as employees or independent contractors. Those with true employees are required by the IRS to withhold income taxes, social security taxes and medicare taxes, and neglecting to make those deposits can leave companies vulnerable to additional liabilities in the form of interest, penalties and other unwanted scrutiny. Further, the Department of Labor has recently signaled its intention to enhance audit efforts with regard to companies it believes are out of compliance in this regard and to utilize its powers to impose burdensome penalties.

Determining Proper Worker Classification

Muddying the waters further for companies wishing to remain in compliance with all relevant governmental agencies is the fact that each one uses its own set of criteria for determining which workers are properly considered employees and which ones are truly independent contractors. The Department of Labor focuses on a so-called “economic realities” test that uses six factors to aid businesses as they attempt to choose the correct classification for workers, including:

  • Whether the work being performed is integral to the employer’s business;
  • Whether the worker’s managerial skills impact his or her opportunity to realize profit or loss;
  • How a worker’s relative investment stacks up against the company’s investment;
  • Whether the work being done requires specialized skills and initiative;
  • Whether the relationship between the parties is permanent or of an indefinite nature;
  • The degree and nature of the company’s control over the worker’s activities, including where, how and when work is performed.

The IRS utilizes a test involving 11 distinct factors, focused heavily on similar criteria to those used by the Department of Labor. The employers financial and behavioral control of the worker are again pivotal to determining correct classification. The Texas Workforce Commission has promulgated a 20-factor test to assess worker status, which a company can use when facing an audit to overcome the presumption present under Texas law that all workers are employees. Under the Texas law presumption test, some specific hallmarks of a genuine independent contractor relationship include:

  • Absence of company-provided training for the worker;
  • Payment upon completion of projects, not by hourly wage;
  • Worker does not use company e-mail accounts;
  • No benefits are provided to the worker;
  • No tax withholdings are made and a 1099 is issued at year’s end;
  • The worker submits invoices for work performed;
  • The worker has a roster of other clients.

Though none of these factors are determinative in and of themselves, taken together they can help create the total picture from which an accurate classification can be made.

Remaining Mindful of Common Pitfalls

Many businesses that find themselves out of compliance when it comes to their classification of workers have not intentionally sidestepped the law, but have simply fallen victim to certain common misconceptions. For instance, some believe that execution of a simple contract declaring the worker to be an independent contract will provide the necessary clarity. However, while Texas will generally defer to the right of parties to contractually define an employment arrangement in this way, the Department of Labor will still use its own test to determine proper status. Further, allowing a worker to work flexible hours in a location of their choosing does not automatically confer independent contractor status. Depending on the work being done, the Labor Department may still find that such individuals are in fact true employees. Ultimately, it is necessary to undertake a global analysis of a wide range of factors in order to make correct classifications and remain on the right side of the law.

Mitigating the Risks of Misclassifying Workers

As stated earlier, many businesses that are out of compliance when it comes to classifying workers have not knowingly made such errors, but have simply misunderstood or misapplied the traditional tests used by key governmental agencies. Fortunately, in addition to seeking guidance from a skilled Texas business lawyer, there are other steps that can be taken to mitigate the risk of improper classification of workers. Some may choose to restructure or re-document their existing independent contractor relationships with greater precision and with an eye toward explicit legal compliance. Others may simply choose to reclassify their independent contractors altogether, and certain businesses may opt to redistribute such workers to workforce management enterprises or dedicated staffing firms.

Essential Guidance for Texas Businesses

Depending on the size and type of business involved, getting worker classifications right can be a very high stakes proposition. The potential sanctions for making improper categorizations can be substantial, and remaining in full compliance with governing agencies must be a priority for all business owners. Bringing decades of business law experience to bear, the attorneys of Murray-Lobb stand ready to provide clients with a comprehensive review of their worker classification practices as well as invaluable guidance on how best to structure the relationships so vital to the success of every enterprise, big or small.

Celebrating the History and Grandeur of July 4

With summer now fully upon us, beach vacations, barbecues and family reunions fill our calendars. But, even in the midst of so much revelry and recreation, it is important for each and every American to stop and remember the reasons why we mark the Fourth of July in such a festive manner and to celebrate the glorious history of our nation’s founding. The purpose behind Independence Day is to mark America’s formal declaration of its ultimate departure from colonial rule and its birth as a fully independent land. It should be noted, however, that the Continental Congress did not make its decision to declare independence on July 4, but rather on July 2, 1776. In actuality, July 4 marks the date upon which the drafters of the Declaration of Independence finalized the language to be used in what would become one of our nation’s most sacred documents.

Early Observances of the Fourth Though in the earliest years following the drafting of the Declaration of Independence, formal celebrations were nothing like the national observances we see today, July 4 was an occasion for jubilation among many, particularly in Philadelphia, where the document was perfected. July 4, 1777 saw Congress adjourning early in order for lawmakers and residents to enjoy fireworks, bonfires and bells. Following the conclusion of the War of 1812, Independence Day observances became more commonplace and more akin to our modern celebrations. Upheaval in the political parties of the day sparked renewed interest in the Declaration of Independence, with the date July 4 taking on greater meaning for many. Some historians believe the fact that three early American presidents, John Adams, Thomas Jefferson and James Monroe, all died on the Fourth of July has lent additional significance to the date in the minds of patriotic citizens.

Congressional Recognition of Holiday Though observed by many since its founding, it was not until Congress took formal action in 1870 that the Fourth of July became a fully recognized national holiday. The piece of legislation itself, H.R. 2224 established the day as an unpaid federal observance, along with other events including Christmas and New Year’s Day. The proposed law did little more than acknowledge the significance of the date and did not establish additional benefits in relation to it. However, in 1938 Congress designated July Fourth as a recognized holiday for which all federal workers would receive a paid day off. In 1959, the federal holiday designation was supplemented by a provision stating that if the Fourth happens to fall on a Saturday, workers covered by the law will have Friday off.

Renewing Our National Commitment to Liberty Though it is easy to get swept away in the fun and excitement of a Fourth of July picnic and lose sight of the holiday’s true meaning, let us remind ourselves of why we continue to celebrate our nation’s independence well over two centuries after it was declared. July Fourth affords all of us a valuable opportunity to ponder our commitment to equality, liberty and individual rights so eloquently expressed by the founders. In essence, a treatise based in the finest traditions of common law, the Declaration of Independence embodies ideas central to our society, including the notions that all of us are endowed with unalienable rights and that government rightly derives its specific powers only from the consent of those it governs. We at Murray-Lobb encourage all Americans to join in this most important national day of remembrance and reflection while also taking part in the joyous, colorful and jubilant gatherings it inspires each and every year. Whether you choose to take in the sights and sounds of a local fireworks display or host friends and family at a backyard picnic, July Fourth is the perfect time to bask in the grandeur and glory of the freedoms we all hold so dear. In the succinct, yet utterly apt words of John Adams when toasting the 50th anniversary of the Declaration, “Independence Forever!”