Lost a client...

Lost a small client today - temporarily.

Before calling us, my contact agreed to give the janitorial work (several hours, one night per week) to her sister, who's just starting a janitorial service.  I took a moment to run through some of the dangers - tax liability, safety, regulatory - she's likely taking on.

1)  She has no compelling evidence that her sister is a real business, not just a thinly disguised employee - sister has no other clients, no significant advertising to the business community, no   business phone, no significant investment in equipment; maybe not even a business checking account.  Come audit time, should the IRS, or the State Department of Revenue, or the unemployment folks, find sister to be, in reality, an employee, my contact's firm will owe taxes, penalties and interest - and each of those entities reports to the others, for more taxes, penalties and interest.

2)  Sister likely has no worker's comp insurance.  In Arizona, a sole proprietor with no employees is not required to carry it, so many do not.  If the sister slips on her wet floor and injures herself, one can predict both a legal and a family altercation.

3)  Sister is untrained and unsupervised, with no back-up; has no idea how to avoid streaking the ceramic floors; has no health and Indoor Air Quality program, or likely knows that anything like that exists.  Not to mention touch point sanitation.

I'd forgotten to mention OSHA.  When I returned the office keys, and picked up our MSDS book, I did so.  My contact had assumed that her sister "has all that stuff" - but the book really needs to be in the place where the janitorial work takes place, and the chemicals are used, and the contact's employees work.  Thus my contact's firm is out of compliance with OSHA.

Bet a beer I have her back within the month.

 

Comments

[Marla Hughes]

Boy did that hit home. I was in the same situation as the sister, though I was no relation to my former employers. I was paid as a sub-contractor (1099) for several years, but paid and treated as an employee.
After just giving up figuring out on my own how to fix it, even though I was 'getting away with it', I turned myself in the the IRS (THAT went over well with the former employers...) and am now working with them to fix the time I worked with that employer. I kept putting off learning what I was supposed to do, then when I did find out on my own I could never make enough money to 'get legal' so I finally just quit to go out on my own, committed to not repeating their business practices and making sure my previous slack business habits don't bleed into my new business.
It'll take awhile, but I'm considering any fines/penalties/etc.. as an education in the school of willful ignorance and hard knocks. :-)

[Bob Croft]

Marla, thanks for the note. I admire your "turning yourself in", to make right your situation - really the only honorable way to do it. Most folks will simply walk away, and hope they're never caught.