Dealers weigh in on IC vs. employee guidance conundrum

Home Inside FCNews Dealers weigh in on IC vs. employee guidance conundrum

September 14/21; Volume 30/Number 7

By Ken Ryan

Flooring dealers acknowledged that the Department of Labor’s (DOL) new guidance on labor classification—independent contractor vs. employee—is potentially a major conflict for the industry.

The World Floor Covering Association (WFCA) estimates that up to 75% of flooring installers today work as subcontractors (FCNews Sept. 7/14), which, depending on DOL interpretation, could place many flooring dealers at risk of being non-compliant. FCNews asked several established independent dealers about the issue. The consensus is that it’s the smaller players who are most likely to have skirted the issue all these years. But as the recent Lowe’s case suggests, it can concern retailers of any size. Lowe’s was forced to pay $6.5 million to settle a class-action suit in California over its use of independent contractors; it had installers wear Lowe’s uniforms, attend Lowe’s training sessions and identify themselves as installers for Lowe’s—all in violation of the DOL classification.

A.J. Boyajian, co-owner of A.J. Rose Carpets & Flooring with three Massachusetts locations, said many dealers are likely not aware of the specifics of this issue. “This would have a drastic impact on our industry and I cannot imagine how it would be implemented and enforced to everyone in the industry at the same time. There is always a less professional company down the street that won’t follow the rules and therefore can charge less and will get the job over the respectable compliant company.”

Mike Foulk, president of Foulk’s Flooring America in Meadville, Pa., said retailers could ignore this issue and hope the DOL doesn’t turn up at their doors or be proactive and address the situation squarely. “This issue is here and real. We as a company have chosen to be proactive; any subcontractors we use must provide as much documentation as possible.”

Foulk explained there are generic tests that can give dealers an indication as to how independent their subcontractors are. He offered the following tips:

  1. Have a co-worker call and ask the installer whom he works for. If he answers with the dealer’s name rather than his own company, it is a good telltale sign that he is an employee.
  2. Look for business presence in the phone book and/or online.
  3. Is the company’s name on the contractor’s vehicle(s)?
  4. Does he have calling cards?
  5. Does he have his company information on his clothing?
  6. Does he work for multiple companies?
  7. Where does he get his work direction?
  8. Does the dealer have proof of insurance from the subcontractor?
  9. Does the dealer have a signed subcontractor agreement with the subcontractor?

Bill Zeigler, owner of Charles F. Zeigler & Sons, a Hanover, Pa.-based dealer, thinks there are many flooring dealers who have not been compliant in the past. “Those of us who comply have long faced stiff competition from those who didn’t play by the rules. In my opinion, this new guidance may compel others to finally come up to standards. The home centers got away with this for years and now are shifting gears in the right direction.”

Carlton Billingsley, owner of Floors & More in Benton, Ark., said many within the retail segment “do not understand the magnitude” this could render on their businesses if steps are not taken to correctly rectify the working relationship with installers. “The relationship between the installer and retailer must be like other services you contract with. An example is how a general contractor works with a sub-contractor on a project. A subcontractor is given guidelines to work within and a contract for services, not furnished tools, vehicle, uniform, etc. The subcontractor should have a business name, federal identification, commercial general liability insurance, vehicle, tools and a signed contract that the contractor is not working for exclusively. [It should also state that it does not] provide the benefits an employee would have. Retailers who work with independent contractors must adopt a best practice to show their compliance in good faith, whether they agree with the laws or not.”

Jim Mudd, president and owner of Sam Kinnaird’s Flooring with two Louisville, Ky., locations, said he thinks the larger independent flooring dealers are up to speed on this issue and that includes his operation. “In our area, we have been making sure for at least 15 years that all installers have liability and workman’s compensation insurance no matter who they work for. Along with insurance, they must have their own tools and trucks and have to pay for anything they mess up. We allow them to work for other dealers and do not make them wear company clothing.”

For more information on misclassification, retailers can visit dol.gov/whd/workers/misclassification/.

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