Workforce commission helps “gig” companies avoid unemployment taxes

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Texas Workforce Commission

The Texas Workforce Commission is being criticized for rules passed Tuesday that were allegedly written by lobbyists for one of the nation’s top “gig economy” companies — that is, firms like Uber that operate through phone apps and the internet, with a workforce made up almost completely of independent contractors.

The rules, adopted on a 2-1 vote by the panel, allow such tech-based companies to avoid paying unemployment taxes on their independent-contractor workers. The three panel members are appointees of Gov. Greg Abbott.

Emails obtained by the Workers Defense Project, a workers advocacy group, show that TWC Commissioner Ruth Hughs worked with lobbyists for Handy.com to make sure the company’s contract workers would not be eligible for unemployment benefits. Handy.com is a website that connects home-service workers with property owners.

The emails show that Hughs created the rule with the help of lobbyists Jerry Valdez and Mackenna Weymeyer, despite TWC claims that it does not use outside entities to advance rules.

The new rule updates the definition of contract workers, including stricter prohibitions on unemployment claims from such workers. The rule also exempts government entities and religious organizations that use contract workers from having to pay unemployment taxes.

Several states have passed laws regulating contract, or gig economy, workers. But in Texas, the workforce commission did it through its rule-making power.

The commission received over 200 responses to its call for public comment on the rule in the 30-day comment period in December and January. Texas Monitor has requested copies of those comments.

It’s not the first time the TWC, which is supposed to uphold state and federal employment laws, has been accused of helping employers avoid paying unemployment costs or worse.

In 2010, then-TWC commissioner Jonathan Babiak advised a group of business owners during a presentation in Houston on how to avoid paying unemployment benefits to departing workers.  The Houston Chronicle reported that Babiak told the group, “[S]ay you’re the boss and you’re going to fire one of your employees. Instead of booting the employee out the door, the Texas Workforce Commission recommends giving your employee the option to resign.”

Employees given that choice are more likely to conclude they aren’t eligible for benefits, said Babiak, who at the time was deputy director of appellate services for the Texas Workforce Commission in Austin. He was quoted as adding that it’s not the employer’s obligation to correct that misunderstanding. If employees resign, he said, “Chances are they won’t file a claim.”

After that, Tom Pauken, then chairman of the commission, wrote in an op-ed article for the Chronicle that it was “not the agency’s position that employers game the system.”

Babiak was reassigned as the agency’s civil rights director, according to Babiak’s LinkedIn page, which says he is now a “business process consultant” for the City of Austin.

The agency was also faulted in 2011 for its lax oversight of for-profit colleges, when the now-defunct ATI Career Training Center was recruiting students from homeless shelters. When WFAA-TV in Dallas investigated, the TWC declined to provide records on the graduation rates of the colleges.

Steve Miller can be reached at [email protected].

2 COMMENTS

  1. Your far better off being unemployed than working in the gig economy. No benefits, no security, rock bottom wages, no help with car insurance, no help with gas, no help with car maintenance. It ends up costing you money to drive for Uber.

  2. The traditional unemployment tax model doesn’t work anymore for companies like Uber and Lyft. Those employees are never laid off or fired. They decide for themselves when to work and how many hours to work. They provide their own car, and their own cell phone to access the trip system that they lease. Taxi cab companies operate much the same way. Texas Monitor is wasting its time bothering us about this subject.

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