Independent contractors have become a very complicated issue for the retailer and the dealer in the floor covering industry. The issue is whether you properly classify an individual or group when you hire them. When you hire someone as an employee, they are subject to a great many laws, e.g. you have to collect income tax for them, their contribution to social security, to unemployment, etc.
With independent contractors, those laws don’t apply. I would love to be able to tell you there’s a single 10-point test to determine whether someone should be classified as an employee or not, and if you apply all these 10 points you’ll always be correct. There actually isn’t a single test. There are two basic tests used by different agencies. But even when two agencies use the same test, they may stress different points.
What we’re trying to do with the White Paper is explain these rules. We’re going to explain it for the federal government, for key states like California, Texas, Florida, Illinois and others, and then sort of sum it up, give you sort of a checklist to worry about, and give you a master contract to work with.
Now, the master contract won’t work in all areas. In some states, for example, if you have employees that do the same thing as independent contractors, there’s an automatic assumption that they’re all employees, across the board. Practically speaking, if you have employee installers and also hire independent installers, certain states will view them all as employees and you will owe all that money for insurance, for overtime, for minimum wage and for all those deductions. It’s rebuttable, but the burden is very high if you use both.
What we’re doing with this White Paper is providing a very good basis that you can take to your local counsel for that particular state need. It may be overkill in some states, but you’d rather overkill something and insure yourself.
And problems can arise in many ways; for example, everyone goes straight to audits, but you can get there in other ways. What does an independent contractor do when he’s out of work? He files for unemployment. Where does he say he worked? He says “XYZ Carpet Company” and you say, “No, he’s an independent contractor” and all of a sudden you find yourself in an audit.
Now, there’s no reason not to use independent contractors, there’s just a caution that needs to be taken. If your business model lends itself to independent contractors, do that. Just take precautions, so you don’t find yourself thinking your sitting happy and pretty and 5 years later you find out you have 5 years of liability.
I’m sure there’s a bunch of retailers out there thinking, “Hey, this will never happen to me.” I used to race bicycles, and someone once said to me, “Jeff, there are two types of bicycle racers: those who have fallen and those who will.” If you’re a retailer and you use independent contractors, you may not have had a problem yet, but the ice is getting thinner and thinner.
The WFCA White Paper will be released free to members in the next 45 to 75 days.
editor’s note: The preceding was excerpted from an interview conducted by TalkFloor’s Dave Foster with Jeff King, counsel for the World Floor Covering Association, during Surfaces 2013. For the complete interview go to www.TalkFloor.com