If you hire contracted talent, you can learn from my mistake…
About eight years ago, I learned the hard way how inconsistent the government classification of employee vs. contractor really is. For over 15 years prior to a very unpleasant incident with the state unemployment insurance division, I had helmed my marketing agency from offices in three different states with a crew of various employees and contractors. My administrative and customer service-facing colleagues were employees, and most of my graphic artist, web development, photography and video support people were independent contractors I brought on board virtually when I needed their support on a client project.
The incident culminated from a series of decisions based erroneously on my experiences in the first two states in which I practiced. I opened the office in the third state specifically because it was booming, and there were very limited providers of business development services in its western half. I knew I needed to network far, wide and fast, and I knew no one already connected with my prospective client base. Bad decision #1: find one or more regionally connected people to network for me on a commission-only basis, and be open to hiring the right person if they surfaced. First part good, second part good, but not as one single strategy.
I placed an ad in the local paper offering up either option to the right person or people. My needs were clearly articulated, and I specified that candidates must have a proven outside or inside sales record. Another oops. I received a tidal wave of applicants and bids. Not one had a proven track record, but some had a network. So, I opted to try one person out on a contract basis. She asked for a base (knowing I was amenable to hiring) plus commission and I acquiesced. She gave me a list of her other clients and I wrote them into the contract, making it clear that she could do as much work for them and any others as she wanted–this seemed important as one was in a similar but not directly competing field.
I realized very early on that she was a bad fit, but I couldn’t find anyone else so I took the “someone is better than no one” approach and kept pushing into the wind. For two years. Oy… During that time, I did hire three employees with benefits, and offered conversion from consultant to employee to my contractor. She declined because she had her own self-employed policy and didn’t want to lose it. Okay… so this is where I shorten the long story…
I terminated our contract with a very kind letter and chat, in which I unfortunately use the word “fired” in the context of “I don’t want you to have that kind of blemish on your CV.” Ouch! She went to the state to get unemployment benefits; they came after me for same. I attended the “court” (adjudicated by an attorney who works for the unemployment insurance division) hearing with an attorney (who knew I’d lose but was happy to take a couple grand off me). The plaintiff perjured. I supplied reams of proof of contractor classification. I lost. State law had a very short list of things that distinguish an employee from a contractor–I had breached one item on the list.
Sigh… The damages would be no higher than $24,000 to me, and turned out to be only $1,600 in dues to the state (plus time wasted and wasteful attorney’s fees). To this day, I remain steadfast that I did nothing wrong and everything right and wholly within the intent and spirit of the law.
Fast forward to today and the Wall Street Journal of July 15, 2015: article here. I stumbled upon this, had the flashback above, and realized that the classification of contractor vs. employee is amorphous at best, and a potential perfect storm at worst. And that’s just in the U.S. This WJS article serves as a reminder that laws change within the same agency, state and regional government agencies have their own (and change them), federal regulation doesn’t necessarily carry across all states (same with states and counties)… and that’s only in the U.S.
I’m the independent contractor now. I closed my company after the 2008 crash and I don’t do the 80-hour week anymore… If I did, I’d agency up to on-board a consultant because I am clearly bad at weeding through the subtexts of employment, wage and benefit law… subtexts that say it’s not that I gave her a base, or prepayment of commission on faith, but that “a business card is proof of employment.” A business card–at least in one state I know. But that was eight years ago, maybe that bit has changed… but I don’t have time to find out for myself. Do you?
Nope? Then let the pros handle it!