Employment: A Prison or a Partnership?

Business owners that I work with regularly comment…

“Ten or twenty years ago, the bad news was I felt like I had a target on my back. The good news was most days that target felt like it was about the size of an apple. Today, between the constantly changing employment laws and my employees, most days I feel like that target is the size of a large watermelon. What should I do? Maybe I should just sell the place!”

It is easy to understand the sentiment. Consider the following items:

• For the 2006 calendar year, the Equal Employment Opportunity Commission was involved in over 85,000 charges from individuals across the country. Those charges resulted in payments via enforcement action or litigation of over $110 million dollars.
• During the summer of 2005 a group of the most powerful labor unions broke away from the AFL-CIO and formed a coalition, “Change to Win.” The coalition is building a war chest in excess of 2 billion dollars with the express purpose of increasing the percentage of American workers who are organized. The group is committed to devoting 75% of its resources for one purpose – organizing unions across the country. And finally, the Supreme Court issued an opinion that could potentially provide leverage to employees at even the smallest businesses.

In such a climate, employment is going to be a partnership or a prison. Frankly, there is little middle ground. While it sounds overly simplistic, I regularly ask colleagues and business owners to give me an example of the “middle ground”. Guess what? I’m still waiting.

Partnerships Will Set You Free
Creating a partnership with employees is the answer to many of the challenges employers face today. People who are reasonably passionate, clear about what they are trying to accomplish, encouraged to take reasonable risk, recognized when they succeed, and held accountable in an appropriate manner when their efforts are unsuccessful, succeed more often than they fail. Don’t take my word for it. Wasn’t that the message twenty years ago of “In Search of Excellence”? What about the writings of Ken Blanchard, or the recent writings of Jim Collins (“Built to Last” and “Good to Great”)?

Creating a partnership with employees, including those who are blue-collar, semi-skilled, or marginally educated, is possible. In my experience, most employees do not want to be the boss. They simply want the boss to recognize they are not an inanimate object.

Unfortunately, creating partnerships with employees is the management equivalent to the notion of service for many companies. What business would actually come out and say, “Our service stinks?” Virtually every business touts its “commitment to excellent service.” Yet, each of our common experience suggests that the ”commitment” is actually a commitment to getting the words “excellent service” on the marketing literature, which is fairly easy to do given a decent copy editor. Bluntly, most organizations simply are not willing to exert the effort required to consistently provide great service. It requires focus and passion. It means little down time from 8 – 6 (and beyond). It means accountability for errors instead of excuses. And in some instances, it means an employee will not remain.

Creating employee partnerships is similar. It begins in the application stage and touches every single aspect of the organization, every policy, every department, and every manager. The application looks different, expectations are phrased differently, and disciplinary action looks different. But before jumping to conclusions, I am not advocating some grown-up baby-sitting service. To the contrary, I am advocating a philosophy that is clearly focused on both parties succeeding.

Sometimes succeeding means an employee gets let go because this is not where he or she will apparently be most successful. Sometimes succeeding means the longest tenured employee does not get promoted, yet he or she understands because the expectations about the organization’s goals were clear from his or her initial interview.

Success today for both business owners and employees is absolutely possible and it need not involve the threat of litigation or 3rd party representation. It does require talented people working together in some very specific ways. For both those in leadership and those led, employment should be a partnership and not a prison. Your company employs plenty of talented people. You get to choose whether those talented employees work like your partners or wards in your prison.

Which do you think will work more productively to achieve your organization’s goals?

The BIG Question…Are They An Independent Contractor, Or Not?

This question continues to haunt employers of all sizes, but most specifically those that hire sales staff as independent contractors.  Many companies choose to hire contractors to fill the role of sales professional for a number of reasons.  The key to determining whether an individual is an independent contractor or an employee is based on a series of factors.  This is applicable to any role a person would fulfill, not just a sales professional.

The IRS uses the 20 common-law factors listed below to ascertain whether a worker is an independent contractor or a regular employee. Please remember that ALL the factors must be taken into consideration in determining compliant contractor/employee status:

1. Instructions. An employer shouldn’t tell a contractor how to do their job.
2. Training. An employer shouldn’t provide substantial training for a contractor.
3. Integration. A contractor shouldn’t be hired to provide a service that is an essential part of an employer’s business. 
4. Personal Services. An employer shouldn’t insist that the work be performed by the contractor rather than someone that the contractor might hire. 
5. Employees. Contractors control and pay their employees. 
6. Length of Relationship. Contractors shouldn’t have a continuing relationship with an employer unless there are multiple contracts.
7. Work Hours. A contractor usually determines the hours worked to complete a job.
8. Amount of Work. A contractor shouldn’t be told to work full time for an employer if that would prevent the contractor from doing other work. 
9. Location. Unless the services can be performed only in one location, a contractor chooses where to do the work. 
10. Sequence of Work. Contractors determine the order in which they accomplish their tasks. 
11. Reports. Contractors should not be required to produce interim reports. 
12. Payment. Contractors are paid for the results of their work, not for the time worked.
13. Expenses. Contractors are responsible for their business expenses.
14. Tools. Contractors typically provide their equipment and tools. 
15. Investment. A contractor has a significant investment in his business, such as a home office. 
16. Profit. Contractors can realize profits and incur losses. 
17. Multiple jobs. Contractors can work for more than one employer at a time. 
18. Availability. Contractors make their services available to the general public.
19. Termination. Contractors cannot be fired at will, as can employees.
20. Liability. Contractors are liable for failure to complete a job.

The wrong determination can have disastrous consequences. Microsoft Corporation had hired a large number of Independent Contractor’s to work on many projects within the company. They were hired for specific projects but many of them worked for a number of years on these projects, they performed many of the same tasks as regular employees and they were provided with workspace, equipment and supplies. When an IRS audit was performed, based on the above and some other factors, these contractors were deemed to be employees. Microsoft settled these cases for $96.9 million.

Some items to keep in mind for sales people:

• The greater the skill required, the more likely the person is an Independent Contractor. The ability to sell is a specific skill. 
• If the individual supplies his/her own tools and materials, it reflects Independent Contractor status. Providing a salesperson with these items will raise a red flag. 
• If the individual is in business for him/herself and has all the appropriate licenses and tax identification numbers, this would suggest an Independent Contractor relationship. Having sales staff become S corporations will help. 
• If the employer determines the work schedule, this reflects an employee relationship. Sales staff should be on their own in terms of hours worked. Requiring a few hours on site on a regular basis can erode the Independent Contractor relationship. 
• If the individual is treated as an employee for tax purposes, this creates an employee relationship.

Bottom line…If it looks like an employee, it acts like an employee and it “feels” like an employee, it probably is!!