When you lie down with dogs ....Dear Ms. Mazure,
We found Mr. Gonzalez's letter regarding the "legal techniques" he evidently uses to cut his payroll-related costs very interesting and revealing. We're sure that it raised a few eyebrows with the feds, the state franchise tax board and the Florida State License Board, as well.
There are a few, rather large loopholes in his method of paying his "pseudo subcontractors." Many states, including the state of Florida, have laws very similar to those in California which make it illegal to employ an individual and pay him as an independent contractor, unless that individual has a valid contractor's license.
Additionally, there are federal directives that allow the IRS to consider an independent contractor (even a licensed contractor) to be an employee if that individual derives more than a certain percentage of his income from that one source. In that situation, the employer would be liable for all federal and state taxes that should have been withheld.
And, finally, a lesson on human nature. If Mr. Gonzalez thinks that those former "loyal employees" won't go for his throat in the event they become injured on the job, disabled and become unable to work, then he's very na?. They'll do whatever they must do to survive. Personal-injury attorneys will scramble over each other for the opportunity to sue him personally. They will see right through his creative "legal techniques" and eat him alive. His customers are most certainly exposed to an increased risk of litigation also.
There will always be those out there who think they're a little more clever than the rest of us and have convinced themselves they've discovered a new angle to circumvent the system in order to avoid paying the financial burdens that come with being a legitimate employer. These are usually the guys that acquire work based almost exclusively on their cut-throat prices. They operate in the gray area and, consequently, must always be looking over their shoulders. No, thanks.
These types of schemes are always risky and, unfortunately, in the end, it's always the employees who are going to take it in the shorts. What happens when work inevitably slows down and they find themselves laid off? As self-employed individuals, they're no longer eligible for unemployment. If employer costs in Florida are similar to those in California, and using the figures Mr. Gonzalez provided in his own letter, it's very easy to compute his costs and savings. Using his "enlightened techniques," Mr. Gonzalez will realize a potential savings of about 40 percent on his gross payroll, with the added benefit of increased production that can be realized by paying his men piecework rather than an hourly wage. Calculate that out for the typical employee he uses in his example who is earning $600 per week and Mr. Gonzales is saving over $1,000 per month on each employee who takes his advice and incorporates.
The employee, on the other hand, (again using Mr. Gonzalez's figures) can expect about a $380 net increase in his monthly income, even with the 10-percent increase in production factored in, if you agree with Mr. Gonzalez's "piecework" supposition. Does the employee still sound like the "main benefactor" to you?
The employee loses his workers comp protection and his unemployment, must pay a higher percentage for his FICA contributions (matching funds that were previously paid by his employer), has to shoulder the increased costs for bookkeeping related to being self employed and incorporated, and will have to work harder and longer to realize that increased production figure that's been factored in. There are also fees to be paid to set up a corporation and corporate maintenance fees to pay, as well. His benefit? An extra penny per square foot. Big deal. Tax benefits? Not really. If the former employee already itemizes on his taxes, the tax benefits are negligible.
Despite what Mr. Gonzalez may claim, most of the big dogs play by the rules and still manage somehow to make a good living ... and they do it without putting their employees or their customers at risk. If he can?t hunt with the big dogs, then he needs to stay on the porch with the puppies.
Mike and Jackie Sparlin
Sparlin Drywall Co.
Electricity and water don't mixTales from the Front As an apprentice in drywall in the mid-1980s, I worked on a job somewhere in the United States (location omitted for the prevention of my own embarrassment). I followed the instructions of my mentor to a tee, or close to a young man's ability to follow instructions.
Screws were spaced properly on the edges of sheets of drywall at 6 inches and in the field at 8 to 12 inches, according to the standard befitting this particular installation. With youth and worry of unemployment, I rushed my new talent to the confounded looks of other plumbers, pipe fitters and electricians.
I was working on a chase wall that concealed high-pressure water. I knew something was wrong when the screw gun I was using geared down and
refused to do its job.
Nevertheless, I bore down. I put my Milwaukee in reverse to remove the screw that would not sink properly. A jet of water immediately soaked me in the upper middle regions and came in contact with the electronic tool I held in my hands.
A jolt of reality shot through my body and I dropped what I was holding, quickly running out of the room in abject horror. The room I had been working in was flooding at a fast pace, spurred by the tiny hole I had placed in a pipe under high-pressure irrigation.
Soon all was made well by professional hydrolysis, but my very presence brought raucous laughs for the remainder of the job.
?Jerry Dean Falls