By Jonathan Trivers
A growing portion of the workforce is classified as independent contractors. The Department of Labor and the IRS have taken notice and they are none too happy. This is a big concern as our estimate indicates that more than 85 percent of all full flooring retailers use subcontractors. Many government agencies think quite a few of these subcontractors are misclassified. The Department of Labor is taking the lead. Last year they issued an Administrators Interpretation where they more broadly defined what an employee is and is not and the same for sub-contractors. They believe that too many are avoiding the cost of being an employee and flaunting the law. Basically, they said they are not putting up with this anymore.
What was the industry response? The largest flooring retailers, many of whom use sub-contractors, had a training session at their annual convention to hear the bad news from a lawyer; and then spent a lot of time trying to figure out how to keep sub-contractors as such and stay within the law or pretty close to the law. There was never a session on the value and cost of having installers as employees.
This happened just as the news continues to show that our industry is losing all types of flooring installers. They aren’t going to some other industry; they are getting off their knees and going home. And this happened as the internet has discovered that service on demand can be successful, especially if you are offering a service (carpet installation, for instance) to flooring buyers and they (the internet company) will be sure your project is finished the way you want. In other words, they are acting like a flooring retailer.
With precious fewer flooring installers, the Internet has discovered the potential of being a seller of services. The astounding success of the Internet for providing any and all sorts of information and selling any and all sorts of things is well known. Amazon has changed retail. But now companies have decided that the service portion of our economy can well be delivered by providers from afar.
Porch.com is launching Porch Retail Solution, a service that allows online retailers to offer installation services for their shoppers. The company’s partnership with Wayfair serves as competition for Amazon, which launched its own home-services division last year.
“If anyone tells you when Amazon enters their space that they were happy, they’re not telling the truth,” Matt Ehrlichman, CEO and chairman, Porch, said. “But it’s been interesting because it’s actually galvanized everyone.” And so it has.
Now flooring installers have very fine companies doing all their marketing for them; these installers can bid on work from gobs of Internet flooring product providers. They will compete with local retailers but the retailer will never know how or who they lost the sale to.
Our industry has fewer flooring installers who are now been given opportunities for work at a price they can determine. Not from another flooring store down the street but from the ozone or cloud or wherever the internet resides.
The Labor Department readily admits that by and large subcontractors like their classification. They are not clamoring to become employees. But the folks at Labor Department are. And certainly so should the flooring retailer; at least for the best installers in their town.