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more on independent contractors - when they're not September 16, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on independent contractors - when they're not
September 16, 2017
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more on independent contractors - when they're not from article on September 8, 2017
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Ken,
    Regarding Anonymous’ email of September 7 about his “independent contractor” salesperson, you were spot on with the legal advice, but there are some other issues that our old buddy Anon should consider.  By the way, it is refreshing that he is asking about possible situations ahead of time instead of waiting for things to get out of control. 
    First, simply calling someone an “independent contractor” doesn’t necessarily make him/her one.  If the person functions as an employee, the IRS, State, unemployment, and workers comp folks may choose to differ, and choose to assess and fine.  The IRS has a very active Employee Misclassification program which aims to bring employers into compliance with steep fines and penalties.  Don’t take this lightly, I am doing a one hour presentation at the Texas Burglar and Fire Alarm annual conference on October 26th.                          Misclassifying employees could put you out of business.
    If Anon is in a state that requires salespeople to be licensed, he may have another issue.  Does the “contractor” have an actual license.  In Texas, for example, salespeople generally have to have a “Pocket Card” which clearly states “Alarm Company Employee.”  The Pocket Card is not a license, it is a permit issued to the Employee through the Licensed company.  If your “Contractor’s” Pocket Card is through your Company, he/she is walking around with a State issued document that clearly states that he/she is an EMPLOYEE.  Yes, the State of Texas says that this is sufficient for the person to operate as an Independent Contractor (they are more concerned about background checks and registration… as they should be) but the IRS could care less what a particular State’s policy is. 
     Anon’s statement Many times when he makes a sale/lease he has the customer make out the deposit payment to his company… really concerns me.  I don’t know the person in question and I don’t want to disparage him or other fine “Independent Contractors” in any way, but Anon is exposing himself to possible issues down the road.  This person is creating a relationship with these customers, Anon’s customers.   They are writing a check to the “Contractor’s” company, this should never be allowed to happen.  It is important to Anon, or any company owner, to control the relationship with the customers.  The customer relationships are Anon’s greatest asset.  There is no business reason for a customer ever to write a check to anyone other than the alarm company.  For all we know a “Contractor” could be claiming to be the actual alarm company and leading the customer to believe that Anon’s company is simply the installing and monitoring company.          This makes it easier for the “Contractor” to visit the customer just prior to the renewal date and tell them that he has a “better deal” with a new monitoring company. 
     I am constantly reminded of the motor oil slogan from the ’70’s, “Pay me now or pay me later.”  Pay Ken and me now for solid agreements and advice or pay us later for lawsuits and tax audits.
Mitch Reitman
Reitman Consulting Group
Fort Worth, TX 
817-698-9999
http://www.reitman.us
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Response
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If you use these two form agreements there is less chance you will run afoul of the independent contractor issue.
Be sure to read the contracts and be in compliance with the terms of the agreement.  
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com