Texas Workforce Commission

Who, What, Why . . .

Who does it apply to: Drug testing is only required in certain industries, but any employer may choose to institute a policy to protect themselves against unauthorized employee use.

Why would I want a policy: You never know when you might begin to suspect that one of your valued employees has begun smoking marijuana to relax or taking methamphetamines to gain a little extra pep. If the employee is taking drugs, it will eventually impact their work product, and perhaps even your customer relationships. A written and instituted drug testing policy gives you the freedom to quell your fears and will help keep your employees honest – even if you never use it.

When can I start testing: After instituting a policy — but there are several steps involved in preparing an appropriate policy and protecting against violating employee privacy rights. You cannot simply walk into the office one day and say we now have a drug testing policy and Joe Salesman will be the first person tested. You will need to work with your lawyer to prepare a legally valid policy, employee consent form, and notice to applicants.

What types of testing policies are allowed:

• Random Testing – just what it sounds like, but it is enforceable because the employees have been warned;

• “For Cause” Testing – if you suspect someone is under the influence of alcohol or drugs or has an addiction you can send them to the lab; and

• Post-Accident Testing – After a wreck or other accident you can test offending employee and any employee who is a victim.

What if I fire an employee who tests positive and they seek unemployment: The Texas Workforce Commission will accept verified test results from an accredited drug testing company to deny an unemployment compensation claim.

How can I handle an employee who refuses to be tested or won’t sign the consent: Call in a witness. If the employee refuses again, you may be left with no alternative except termination. Do not ever physically force an employee to take a test.

What if I want to keep an employee who tests positive: You must be careful. If the employee returns to drugs or alcohol and causes an accident, you were on notice. Give them one chance – in writing – with zero tolerance and weekly testing that the employee agrees to pay for as a condition of avoiding termination.

Common Situations:

Employee Car Wreck: An employee sent out on a work errand is involved in an accident. The police suspect that the employee was high on cocaine at the time of the accident and test his blood. He comes back positive for cocaine use. This will be exhibit number one at the trial of the personal injury case against your business. If you had an employee drug testing policy, the offender might have been too afraid to use or caught before the accident.

Signs of Use Before or While At Work: One morning, an employee arrives with a smell you recognize but have not encountered since college. With a drug testing policy you can ask the employee to visit the lab and learn of a potential issue before more serious problems arise. Without one, you will be hard pressed to justify sending the employee for testing. By the time you put a policy in place, it might be too late.

Workplace Accident Victim: A warehouse employee rams a forklift into a pallet of expensive electronics without any rational explanation injuring himself in the process. With a drug testing policy you are in a position to find out whether drugs were a portion of the cause of the incident.

Signs of an Addiction: A normally even-keeled employee becomes increasingly belligerent with other employees. You question the employee about problems in their personal life, but nothing comes of the discussion. Perhaps drugs are involved. With a drug testing policy you can find out for certain.

What should I do:

Good: Implement a drug testing policy for existing employees and obtain their signature on a written consent at any time before testing.

Better: Implement a drug testing policy, have all employees sign off on a notice that they have been made aware of the policy, use a consent form any time the policy will be utilized, and place a disclaimer in your employment applications indicating that you utilize employee drug testing.

Best: Follow the advice above and make sure to locate a lab in advance that confirms initial results using the GC/MS method. Initiate random testing of at least one person each year to reinforce the policy is used and followed.

Who, What, Why . . .

Who does it apply to: Any employer who characterizes someone who works for them as an independent contractor and does not withhold taxes for payments made to that person.

Why does it matter: While you may not think it matters much whether the individual pays their taxes or you withhold them, the IRS, Texas Workforce Commission (TWC), and Texas Attorney General (for child support) care a lot. It could become an issue for your business in many different kinds of lawsuits.

How does it affect me: The consequences of mischaracterizing an independent contractor as an employee are minimal, but the consequences of mischaracterizing an employee as an independent contractor can be significant. Can you say TWC or IRS . . . Audit? Penalties? Interest?

What is the rule: The TWC and IRS will start with a presumption that the person is an employee so owners really start off with one strike against them. The tests used by the TWC, IRS, and in commercial litigation are all different, but the factors considered are similar. What follows is an amalgamation of the tests that should give you a good idea of what category the person falls into:

• Instruction and Control – This is the KEY factor! If you say where to go and leave it up to the individual to get the work done, they may be an independent contractor. If you tell the individual how to do it, they start to look more like an employee. Each additional instruction slides the scale closer to employee status.

• Training – If you are training them, they are probably employees

• Equipment and Expenses – If you provide equipment and pay expenses, they are probably an employee

• Benefits – If you provide benefits, like healthcare and 401(k), they are almost definitely an employee

• Other Work – If the person works solely for you, perhaps has set hours of work, and would not have time for another “customer” or employer, they are probably an employee. Independent contractors regularly work for numerous customers or clients.

• How Paid – If you pay a weekly salary or draw that is not dependent on performance, they are probably an employee. Independent contractors are usually paid by the job and don’t get paid if a job is done unsatisfactorily.

• Terminating the Relationship – If you can unilaterally let the person go in the middle of a project or they can walk away from work in progress, they are probably an employee. Independent contractors cannot usually be terminated in the middle of a project without someone having a right to damages.

Common Situations:

Outside Sales Rep: Often the most difficult to characterize, the outside sales representative is a bit of a chameleon. The factors that really matter here are: (1) whether you provide training or a particular sales pitch; (2) whether they act as a sales representative for other companies or whether you would allow the person to sell for another company; (3) how they are paid – straight commission or commission and salary; and (4) whether you reimburse expenses. NOTE: If there is ever a covenant not to compete – you best characterize them as an employee.

Terminated “Contractor”: In a down economy, you cut back your workforce, including several “contractor” construction workmen. One decides to file for unemployment. When the TWC investigates, it will determine whether you have properly characterized the workman. If you lose, the TWC will make you responsible for back taxes, and interest (which you will have a great time getting back from the workman). Then . . . the TWC will tell the IRS and Attorney General. After their audits you can find out how much back child support you should have withheld that you are now responsible for!

Contract Employee v. Independent Contractor: Don’t mistake a contract employee for an independent contractor. Contract employees are still “employees” who are paid like any other employee and for whom you must deduct appropriate state and federal taxes.

Accident: One of the few advantages to a business owner in characterizing people as independent contractors arises in the event of an accident. If you have a true independent contractor and they injure someone while working for you, there is less potential liability for you! Conversely, employees involved in accidents are the direct responsibility of the employer (unless they were working outside the “scope of employment”).

What should I do:

Good: Conduct a quick review of those who work for you. In most cases you will quickly be able to rule out concern except in a few cases. For the exceptions, examine the above factors and make sure to maintain appropriate separation. Too often, an independent contractor will grow into an employee over time as they become a more integral part of your business.

Better: Create written job classifications for each position in your company including restrictions on the position. Make a written contract with all independent contractors that clearly lays out their status (but do not include a covenant not to compete – which is a clear sign of an employee)

Best: In this case, best is really “safest.” If you characterize everyone who works for you in any capacity as an employee, except with the most obvious exceptions, there will rarely be any cause for concern. That said, it can result in an administrative headache.