Author: James Watson, Owner/President
Texas Marshal Protection Agency, LLC
An issue has come up in multiple Facebook groups recently – it’s an issue that has been debated left and right for many years. Some folks love it, some folks hate it, and there are tons of officers and company owners that are on either side of the fence because they 1) don’t see any issue with it, or 2) think there is some sort of loophole in the law that allows it. For the purposes of informing the members of these groups and all others that may be trying to find the answer, I’d like to clear up any confusion on the matter.
Can you work 1099 in security (AKA can Company A “employ” you as a security officer without being a W-2 employee)?
The short version…In Texas, absolutely NOT.
I personally received clarification on this matter many years ago when the Texas Department of Public Safety actually gave you real answers to questions. Now, depending on the agent you talk to, you can get conflicting information or simply told to look in Chapter 1702 of the Texas Occupations Code or Chapter 35 of the Texas Administrative Code. That being said, a huge number will ask, “Where in the law does it say that I can’t work 1099 as a security officer?” Well, you’re not going to find it written in plain text anywhere that you can’t do it, but by using existing laws and common sense, you’ll see why there is absolutely no gray areas on this matter; no loopholes or otherwise.
First let’s take a look at what “1099” actually means. Reference https://www.irs.gov/pub/irs-pdf/f1099nec.pdf
“You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax.”
Let’s also reference https://www.irs.gov/businesses/small-businesses-self-employed/forms-and-associated-taxes-for-independent-contractors
“If you paid someone who is not your employee, such as a subcontractor, attorney or accountant $600 or more for services provided during the year, a Form 1099-NEC needs to be completed…”
Here you can clearly see that 1099 means the company defines you as an “Independent Contractor / Nonemployee”. Keep this in mind – this is important, it’ll make sense later.
Next, let’s take a look at what the State of Texas defines as an Independent Contractor. Reference https://www.twc.texas.gov/news/efte/tbcapp/ppts/indepcont-tax.pdf and we are specifically going to look at Slide #5.
“An independent contractor is effectively a self-employed independent business entity who is in a position to make a profit or loss based upon how he or she manages their own independent enterprise while fulfilling the contract.”
Here you can clearly see that under the state’s interpretation of the term, they define you as being effectively your own company. Hang in there with me, this is all going to make sense. We’re going to get into the specifics below.
Now, let’s all get on the same page for the details below. Download the current 1702&35 document from DPS here. https://www.dps.texas.gov/rsd/psb/docs/statutesRules.pdf
First, let’s go over some definitions.
Sec. 1702.002. DEFINITIONS.
(5-b) “Company license” means a license issued by the department that entitles a person to operate as a security services contractor or investigations company.
(8-a) “Individual license” means a license issued by the department that entitles an individual to perform a service regulated by this chapter for a company license holder, including a personal protection officer license.
(20-a) “Security officer” means a person who performs the activities described by Section 1702.222.
(22) “Security services contractor” means a person who performs the activities described by Section 1702.102.
Let’s now take a look at Sec. 1702.222. SECURITY OFFICER.
An individual acts as a security officer for purposes of this chapter if the individual is:
(1) employed by a security services contractor or the security department of a private business; and
(2) employed to perform the duties of an alarm systems response runner who responds to the first signal of entry, a security guard, security watchman, security patrolman, armored car guard, or courier guard.
IMPORTANT: Take note of the mention “employed by”…not “contracted by”, but “employed by”.
Let’s now take a look at Sec. 1702.102. SECURITY SERVICES CONTRACTOR LICENSE REQUIRED; SCOPE OF LICENSE.
(a) Unless the person holds a license as a security services contractor, a person may not:
(1) act as an alarm systems company, armored car company, courier company, guard company, or locksmith company;
(2) offer to perform the services of a company in Subdivision (1); or
(3) engage in business activity for which a license is required under this chapter.
IMPORTANT: The state requires that you have your own security services contractor license if you are acting as your own company. Hopefully you can start to see the pieces of the puzzle coming together now.
Let’s now take a look at Sec. 1702.103. CLASSIFICATION AND LIMITATION OF COMPANY LICENSES.
(a) The company license classifications are:
(1) Class A: investigations company license, covering operations of an investigations company;
(2) Class B: security services contractor license, covering operations of a security services contractor;
(3) Class C: covering the operations included within Class A and Class B…
Let’s now take a look at Sec. 1702.108. GUARD COMPANY.
A person acts as a guard company for the purposes of this chapter if the person employs an individual described by Section 1702.323(d) or engages in the business of or undertakes to provide a private watchman, guard, or street patrol service on a contractual basis for another person to:
(1) prevent entry, larceny, vandalism, abuse, fire, or trespass on private property;
(2) prevent, observe, or detect unauthorized activity on private property;
(3) control, regulate, or direct the movement of the public, whether by vehicle or otherwise, only to the extent and for the time directly and specifically required to ensure the protection of property;
(4) protect an individual from bodily harm including through the use of a personal protection officer; or
(5) perform a function similar to a function listed in this section.
Again, take note of the term “employs”.
Further let’s also take note of Sec. 1702.124. INSURANCE REQUIREMENT.
(a) An applicant is not eligible for a company license unless the applicant provides as part of the application:
(1) a certificate of insurance or other documentary evidence of a general liability insurance policy countersigned by an insurance agent licensed in this state; or
(2) a certificate of insurance for surplus lines coverage obtained under Chapter 981, Insurance Code, through a licensed Texas surplus lines agent resident in this state.
(b) The general liability insurance policy must be conditioned to pay on behalf of the company license holder damages that the company license holder becomes legally obligated to pay because of bodily injury, property damage, or personal injury, caused by an event involving the principal, or an officer, agent, or employee of the principal, in the conduct of any activity or service for which the company license holder is licensed under this chapter.
(c) The insurance policy must contain minimum limits of:
(1) $100,000 for each occurrence for bodily injury and property damage;
(2) $50,000 for each occurrence for personal injury; and
(3) a total aggregate amount of $200,000 for all occurrences.
Lastly, let’s take a look at RULE §35.14 SECURITY OFFICER UNIFORMS
(a) All commissioned and noncommissioned private security officers shall, at a minimum, display on their outermost garment the name of the company by which the security officer is employed, the word “Security,” and the last name of the security officer. These items shall each be of a size, style, shape, design, and type that are clearly visible by a reasonable person under normal conditions…
Putting it all together… #
The IRS and the State of Texas agree that 1099 is for “Independent Contractors” AKA if you are 1099, you are not an employee of the company; you are for lack of better terms, acting as your own company. Thus, if you are working 1099 as your own company, you are required to get your own company license, your own insurance to satisfy the insurance requirements for the license, and you will need your own patches to identify your affiliation with said company.
Where you go wrong… #
The company that is offering you a 1099 position cannot legally hold your license since you’re not an employee. Strike 1. As such, you will need to show proof that you are performing services on behalf of your own company and that you are holding your own licensing. No company license? Strike 2. You’re out there working legally unlicensed since you’re not an employee of the company whose patch you have on your shirt, and since you don’t have your own company license, you’re unaffiliated and thus impersonating a security officer. Strike 3 folks. This is a sure way to not only lose your license and be liable for civil penalties, but you’re subjecting yourself to getting arrested and facing real criminal charges.
Look elsewhere for a company that does business the right way. What do you have to gain from working 1099 in the first place? You have very few, if any, legally-mandated rights you would as an employee, the company is not required to pay you OT rates after 40 hours, you’re not getting the proper taxes withheld from your income so now you’re liable to make those tax payments yourself, among many other privileges you’re giving up by being “self-employed”.
Sec. 1702.322. LAW ENFORCEMENT PERSONNEL.
This chapter does not apply to:
(1) a person who has full-time employment as a peace officer and who receives compensation for private employment on an individual or an independent contractor basis as a patrolman, guard, extra job coordinator, or watchman…
Yes, if you’re a peace officer that meets the requirements of this statute (reference the full text for details), this document does not apply to you. Check with your employing agency for full details and applicable policies.
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