Are Flooring Contractors and Retailers Going to Lose Their Independence?
Recently, the government has been redefining the meaning of an independent contractor. Much has been written in the trade press and by the WFCA about the issue, the contents of which dealt with the rules that have been put into place with nary a word about why this came about, or more importantly, are these rules fair or what can be done about them? It’s as though retailers should just lie down and accept them no matter what.
The defining of independent contractors is not a new issue. The IRS tried to impose new standards of what an independent contractor was in the ‘70s, obviously to make it easier to collect taxes and fees. They aggressively prosecuted retailers in this industry, costing many flooring retailers hundreds of thousands of dollars in back taxes and fines. Many businesses actually had to close.
At the time I was a member of the executive board of The Retail Floor Covering Institute (RFI), a mentoring and advocacy group for our retailers. Some of the top industry executives in manufacturing, distribution and retail were dedicated members. The RFI was a treasure trove of knowledge providing business acumen, training programs, marketing help and legal assistance to thousands of retailers. Unfortunately, the RFI was forced to close due to circumstances too complex to discuss in this article. Nothing like this organization exists since or now.
When the IRS moved against retailers about the independent contractor issue, we sent our attorney, Sheldon London, to Washington to fight this unfair move. Guess what? We won, protecting not only our thousands of members but the entire industry. Now the issue has reared its ugly head once more, but nowhere have I heard, seen or read about anyone in the industry mounting objections to this unfair if not illegal issue. It’s difficult to believe that attitudes have changed this much over the years.
A little background may be helpful in understanding the issue. First of all, for the vast majority of retailers, it is far more efficient and effective to use independent contractors rather than hire them as employees. As a former installer, I know installers with motivation and skills would never want to work for anyone since they can make several times the money on their own—a win for both retailers and installers for the same reason retailers find that commissioned salespeople are the most efficient way of moving their merchandise. Commissioned salespeople provide much better service because their livelihood depends upon it. That is why the paragons of service in retail, Nordstrom and Bloomingdale’s, use commissioned salespeople in most departments.
As an installer, I used to take two helpers with me and developed a system where we could install upwards of 200 square yards of residential carpeting a day including custom stairs. Retailers who employ installers tell me that they expect 50 to 70 yards a day from their people. Plug in the fact that in my day every installer was expected to move all furniture (grand pianos included) and we hand-sewed all our seams. I loved my job because it kept me in shape, we made piles of money and it was extremely gratifying that we could beautifully transform a customer’s home in less than a day. To make it fun, helpers and I would have contests of which of us could install a bedroom in less time. Tacking, padding and a professional-looking install took the winner less than 15 minutes in most cases.
Just so everyone knows, my feeling is today’s push to redefine independent contractors came solely from the unions to make it easier to organize employees. The National Labor Relations board (NLRB) has accommodated the union with rules that just about make it impossible to be an independent contractor. Why would an installer or drywaller or carpenter need a separate office to run their business? Why can’t installers limit their business to one client if they so choose?
When I was a retailer, I copied a merchandising method from a large furniture retailer, shaping it to fit my flooring business. It allowed us to collect payment in full for merchandise upfront, have salespeople recommend which installer to call, and that installer would set up the installation and bill the customer directly for labor. I doubt this manner of operation would pass muster today with the NLRB, even though we didn’t schedule the work and the installers collected checks from a different source every day.
I don’t really have a dog in this fight anymore, but it is beyond me why no one in this industry has seemed to offer much resistance. Even the giant Lowe’s organization laid down and died on the issue, paying hundreds of thousands of dollars in back pay, fines and fees, but that doesn’t have to be. There are many organizations (WFCA, CRI, suppliers and merchandising groups) in this industry that could—and should—mount an offensive to these unfair government rules. Unopposed, this issue could add to the already dwindling number of specialty floor covering retailers.