We asked retailers and contractors to share their hiring philosophy for their installation staff. Do they employ installers full-time or sub the work out? What are the advantages and disadvantages surrounding both types of employees? How are retailers reacting to the changing definition of what constitutes an employee versus a subcontractor?

Do you employ installers, or do you subcontract the work out?

Leonard Zmijewski, CEO, Mr. David’s Flooring International, an INSTALL Warranty Contractor: “Generally we do not sub out work. Instead, we employ many hourly, full time and highly-trained installers who are dedicated to doing the job right.”

Kathy Cloud, president, M. Frank Higgins & Co.: “We’re a union shop with a workforce that is dedicated to us and only work for us. We have about 35 employees on our crew. We do subcontract some of our work out, which falls in the category of ceramic, epoxy flooring, etc. where we don’t have enough contractors to cover that area of expertise. However 75% of all of our work we do ourselves.”

John Becker, president and CEO, Floors by Beckers: “We do both. We employ 50 full-time installers who are very loyal, very reliable, union-trained as well as trained by us. We have full control of our service operation in that setting because they’re employees. With subcontractors you have to be very conscience of the labor laws—scheduling and uniforms and all those things that would categorize them as employees. We don’t have as much control over subcontractors as we do with employees in terms of controlling their schedule.”

Cloud: “Our staff is very loyal and reliable. We also treat them well. While their salaries are dictated by the union, we try to do a lot of things with them and our business—throwing parties for them twice a year where they can invite their families, get-togethers during the summer and holidays, training seminars, etc. We always try to keep them up-to-date and offer even more than what the union offers and actually train them on specific products. We feel really strongly about our training and it’s something that really sets us apart. We become experts in as many fields as we can.”

What are the advantages and the challenges with these different arrangements?

Zmijewski: “This is not always the case, but a lot of times subcontractors are guys who worked with a company and learned some of the trade and decided to go into business on their own. They work out of a van and are not certified by anyone so they have varying skill sets and may or may not know how to work with all flooring materials. They are usually smaller companies and may be more inclined to shortchange a job if they are struggling financially, especially if the customer negotiated down the price beyond what is fair. It’s a different type of relationship between employer and subcontractor.

“Conversely, we believe there is a better relationship between contractors and employees if they are paid by the hour. We also believe in ensuring the quality of training that all of our installers must undergo before reaching installer status. As an INSTALL Warranty Contractor, all of our employees receive four years of training before they can become installers.

“The INSTALL Training Program is a labor management cooperative in which we create and maintain training standards for the entire industry. As part of this training, all of our installers are certified to do the work to the manufacturer’s criteria and they must continually be recertified and tested to maintain and update their skill sets. There is no question about our installers’ quality of workmanship on a project. The customer knows exactly what to expect when they work with us and we continue to raise their expectations.”

Cloud: “An advantage of our own workforce is we can control what happens on the job. In terms of skill set, we know who to put on what job and that is really great because we really know our workforce intimately. The disadvantage is we don’t always have enough people. For example, when we balloon up in the summer, we have to rely on going to the union hall and we don’t necessarily know who we’re getting or where they’ll be working so that can be a challenge. In terms of our subcontractors, they get busy too and aren’t strictly dedicated to us so there are times when we can‘t always rely on them. when they’re busy at the same time we are.”

Becker: “The advantages of a union are highly-trained and consistently trained installers who are assured of benefits, health and welfare, training and education, retirement benefits and all the things entailed under their program.

“On the other hand, a non-union employee, or subcontractor, is responsible for all those things previously mentioned. A lot of those aspects they have to get on their own and it’s not company-direct. They really end up becoming the business person and the craftsperson, crossing their T’s and dotting their I’s.

“There are great business people who shouldn’t be craftspeople and great craftspeople who shouldn’t be business people. That’s when the independent contractor becomes a craftsperson and a business person—all those bundled into one package. I think service is more real-time, more direct and more controlled in an employee/union setting like we have.”

How are retailers and contractors reacting to the changing definition of what constitutes an employee versus a subcontractor?

Zmijewski: “We are a commercial contractor so I cannot speak to how retailers would react to that shift in definition. I can say that we believe the best possible way to do a job is with our own employees who are dedicated to doing the job right the first time.”

Cloud: “Employees have to work for us exclusively and even though [some of] our installers aren’t, it still increases our numbers. For example, when it comes to healthcare, we have to include employees along with all of our installers, so our number has actually become more like 50+. They have their insurance through the union, which is something we pay, but technically we only have 12-15 employees in our office that are non-union. We offer healthcare to them but we’re in a bigger market for it because we have to claim 50+ employees and that’s a challenge. Not to mention, they have to have certificates of insurance and it’s hard to keep track of all of that, especially with all of the requirements and rules around healthcare now.”

Becker: “Some businesses aren’t even familiar with the term and definition of a subcontractor. There are different tests for defining whether someone is an employee or a subcontractor. As you answer the questions, if you answer yes to so many of them then it basically says you don’t have an independent subcontractor but instead a controlled employee situation. This allows the government to come in and categorize them as your employee, when in reality you truly see them as an independent subcontractor.

“For example, if you begin putting your company uniforms on them and start scheduling their jobs and controlling their production, the government can qualify them as an employee and, in turn, make you liable for any taxes that they’re behind on or any benefits they’re behind on—you can be dragged into any and/or all of that stuff. There’s a very high price to pay if you don’t know that answer.

“A lot of people are ignorant to it. About 10 years ago, the government looked into all these retailers to look into the subcontractors they were using and now they’re making another little sweep across the industry, and I’ve been hearing about it in a lot of different circles. It has gotten to be a very serious thing that every retailer should be aware of. If the Dept. of Labor finds out you’re treating a subcontractor as an employee, they’re going to come looking for you. They find the subcontractors who aren’t paying their taxes, they find out where their checks are coming from and then they audit that floor covering retailer with the knowledge of how long the he has been working for a business, what they’ve been paying the contractor, etc.

“I’m happy our government does things like that and checks out similar situations such as these because it keeps the whole business world leveled. I have to pay taxes and insurance and I have a good-paying job and we want everyone to do that in society. I don’t want somebody having less force over the people under their thumb, taking advantage of them and then they don’t pay their taxes and yet they share all the things that the rest of us share in society without paying their fair share, so I’m happy that the government steps in.

“We want to live and operate within a clean, successful and honest system and that doesn’t happen at the lowest cost. We want the industry to be healthy, and the way it gets healthy is playing by the rules that are in place.”

Bonus: TalkFloor Interviews WFCA’s Jennings

Dave Foster of Floor Radio and editorial director of TalkFloor recently interviewed Tom Jennings, vice president of professional development, World Floor Covering Association (WFCA), about the questions behind categorizing workers as independent contractors versus employees.

Regarding the Labor Department’s recent reinterpretation of the definition of an independent contractor under the Fair Labor Standards Act, which would reclassify most independent contractors as employees, Jennings said, “If they get serious about it, this is going to shake some businesses clear to their core, because the reality is not only what businesses have been doing in terms of their relationship with the contractors. Many of the contractors themselves have been in non-compliance—because you have to have more than a truck, tools and cell phone in your pocket to be considered a contractor.

“Legitimate contractors that have a business front, or many times we call them workrooms in our industry, are more than likely in compliance or somewhat close to it. But the guy with just a helper and a truck and a phone in his pocket really isn’t going to fall in compliance as far as the Department of Labor is concerned. Most people aren’t going to be in compliance—let’s just call it like it is.

“If a person gets more than 51% of their work from any one source, he would not be considered independent. The only thing you can legally do is tell them the timeframe of when a job has to be done by. They have to be able to show a reasonable chance of loss because if you’re in business you both make and lose money. That means they set the rates and they suffer the consequences—some of that depends on the contractors and where they work.

“The other issue that is kind of unsettling for many is there are more than a few dealers out here that partially employ installers and use contractors to fill in the voids or do the rest. They’re really at risk because if you have a contractor and an employee both performing the same task and function, according to the Dept. of Labor, they’ll be recognized as an employee.

“Dept. of Labor isn’t just concerned with flooring, but construction trades in general. The person who is the head of the Maryland Dept. of Labor got on this search three or four years ago when he was with Maryland and our WFCA chapter there took a lot of time, energy and work to try to get in compliance and get some things overturned.

“Well, he’s now the U.S. chair of the Dept. of Labor so he’s taken the same platform. Last I knew he had 26 states that had signed on with a memorandum that says any information they get at the state level they will share with the federal level or with the IRS. It’s a revenue search and there are a lot of people who have been slipping through the cracks for a long time as far as getting their taxes all paid and so forth. One side of my brain says we all pay our share and play it fairly, but the reality is if they come in and enforce it unevenly, it’s going to hurt some people.”

Part 1 and 2 of the interview with Tom Jennings can be found on the Floor Trends website by clicking the ‘TalkFloor’ tab, and then choosing ‘Floor Radio.’ Use the following link to directly access these, and many other Floor Radio interviews: www.floortrendsmag.com/media/podcasts/2708.