In a recent Texas decision, the court said that workers selling insurance for Texas Farm Bureau and its affiliated insurance companies should be considered employees and not independent contractors. 

The court's decision was based on the "economic reality" test, which has five factors: the amount of control a business has over a worker; the extent of the investments by the business and worker; the degree to which a business determines the worker's opportunity for profit and loss; the skill required for the job; and the relationship permanency.

The judge noted that these factors worked in favor of calling the salespeople employees rather than independent contractors. Among other things, the judge said the company exercised employee-like control over the workers rather than allowing them to work independently: "While plaintiffs have some discretion in their day-to-day affairs, their freedom does not reach the level of control that indicates status as an independent contractor," the judge said.

The judge also looked at the "extent of the investments by the business and worker," and found that the business had more invested than the workers. Usually, when a worker is a true independent contractor, he or she will purchase the necessary tools or other property to operate a business. If the worker does not have an investment, then the worker may be an employee. For example, a cashier at the supermarket does not buy their own cash register. Yet, a plumber--who is a typical independent contractor--invests their own money to buy a van and tools for the job. 

The judge rejected the defendant's argument that an independent contractor agreement automatically that the salespeople are contractors. Although judges will take a contract into account, the real focus is on how the worker is treated rather than how the parties label the relationship. 

Independent contractors often lack protections required for employees, such as overtime pay, minimum wage, 401(k) accounts, health insurance, and protection from discrimination or harassment. 

If you believe you have been misclassified as an independent contractor, contact us for a free and confidential case assessment. 

The case discussed above is Ferguson v. Texas Farm Bureau, No. 6:17-cv-00111 (W.D. Tex.).