Dallas Employment Lawyer Blog
Dallas Employment Trial Lawyer Austin Campbell
Summary: This blog briefly discusses what it means to be an independent contractor or employee. In particular, it goes over some special rights afforded to sales representatives who are contractors in Texas.
In employment law, a lot can turn on whether you are considered an employee or an independent contractor. Legally, whether someone is an employee and not an independent contractor largely depends on the level of “control” the employer has over the person’s day-to-day work. The more freedom someone has to set their own schedule, control their own work quality, use their own supplies, and choose where or with whom they want to work, the more likely they are to be an independent contractor and not an employee. On the other hand, whether your employer labels you a contractor or issues a Form 1099 to you at the end of the year are relatively unimportant. Although on paper being a contractor can sound great, unfortunately some employers may deliberately misclassify employees as contractors.
That is because, in Texas, those considered independent contractors are typically afforded fewer rights than employees. They generally do not get any of the benefits employees do. And an independent contractor is generally exempt from most civil rights protections or similar laws that protect employees. Really, the only protections that a contractor can typically rely on are those in their written contract itself (if they have one at all).
One strange exception to this applies to wholesale sales representatives hired in Texas as contractors for companies that manufacture, produce, import, or distribute products. Those wholesale sales reps are protected by Chapter 54 of the Texas Business & Commerce Code, the “Texas Sales Representative Act.”
Specifically, the TSRA helps protect those contract sales reps’ right to their commissions. It states that the sales reps are entitled to a written contract that lays out their commission structure and a guaranteed venue in Texas for any disputes that may come from that contract. They must be provided a copy of this contract, as well. Most critically of all, the law requires that if a company refuses to comply with the commissions plan by not paying out the correct amount of commissions, the contractor can be awarded three times the actual amount of commissions owed (so-called “treble damages”), plus attorneys’ fees. This provides a big incentive for these companies to actually comply with their agreements.
There are limitations to the TSRA. Most glaringly (and perhaps strangely), it only protects contractors, not employees paid on commission. Second, the Texas Supreme Court has also recently ruled that the treble damages provision of the TSRA only applies to actual unpaid commissions. That is, late payment does not trigger a right to the treble damages – only non-payment. The rationale, supposedly, is that it is better for these companies to pay late than not at all, so they shouldn’t be punished the same.
Your rights in Texas can depend heavily on how the law classifies your employment status. Nonetheless, whether you are a contractor or employee, if you are concerned your boss is skimping on your commissions, you should talk to an employment attorney like those at Rob Wiley, P.C.