Contract Employee's Newsletter
Helping Contract Professionals Manage Their Careers

Vol. 3, No. 8
April 11, 2003

Edited by James R. Ziegler

A Companion to:
The Contract Employee's Handbook
www.cehandbook.com

Sponsored by:
P.A.C.E. - Professional Association for Contract Employment
www.pacepros.com

 

About The Contract Employee's Newsletter

The Contract Employee's Newsletter is a free online publication for technical and professional contractors containing news, commentary, tips, links to useful resources, nuggets of wisdom submitted by readers, and anything else that seems appropriate at the time. The CENewsletter is published bi-weekly or whenever issues warrant and time allows. The subscriber list is confidential and will not be disclosed outside this organization.


In This Issue

Read recent issues of The Contract Employee's Newsletter.

News and Views

Another Well-balanced Article on the HP Class-action Lawsuit

Benjamin Pimentel, San Francisco Chronicle Staff Writer, has written a pretty good story on the class-action lawsuit filed by contractors against Hewlett Packard.

One point of contention, however: The article implies that the plaintiffs are self-employed independent contractors with 1099 employment status. Paragraph 15 of my copy of the original lawsuit says otherwise:

15. The specific steps undertaken by HP in its efforts to evade the employer-employee relationship with plaintiffs include the following. First, each plaintiff was and is required to be the nominal employee of a third party "agent." This agent typically is an incorporated entity (often one person who incorporated him or herself) from whom HP hires the contracted services of each plaintiff. Prior to these services being provided to HP, the agent and HP enter into a Professional Services Agreement (hereinafter "PSA"). Under the terms of each PSA, HP agrees to an hourly rate to be paid for the services of each person supplied to HP. This rate is and was always an hourly rate agreed upon between the agent and HP. As plaintiffs perform services for HP, they supply statements of hours worked to their HP manager who approves (or disapproves) the hours claimed and plaintiffs then submit the document to their respective agent. In turn the agents invoice HP for the amounts approved and distribute payment to plaintiffs.

Whether the plaintiffs were employed by a third-party employer of record (such as a temp agency or recruiting firm) or by their own one-person corporation is not mentioned in the lawsuit because how they were payrolled is immaterial to the lawsuit. In both situations the plaintiffs would have had W-2 employee status with a third-party employer (either with their agency or with their own one-person corporation).

The point is that who prepared their payroll and withheld their taxes is immaterial to the plaintiff's status as a common-law employee of the company. The only thing that counts is their relationship with the company where they worked.

Can you see the folly of companies requiring that their on-site contractors be incorporated or employed by an agency?

In this regard, referring contingent workers to employment by a staffing vendor does absolutely nothing to protect a company from co-employment risk factors. In virtually all major cases of reclassification, resulting in hundreds of millions of dollars in fines and judgments, the reclassified contingent workers were W-2 employees of a third-party, as were the contractors that filed the recent class-action lawsuit against HP.

The only effective solution to co-employment risk is a legal division of employment, which staffing vendors and expensive on-site vendor management services (gatekeepers, preferred vendors, etc.) do not and cannot provide. ComplianceSecurityTM, offered by P.A.C.E., is the first and only fully automated, digital division of employment and risk management solution for the contingent workforce. The legal content and compliance process was developed by attorneys who specialize in co-employment risk.

I wrote a short piece on the class-action lawsuit against HP in the Vol. 3, No. 4 issue of the Contract Employee's Newsletter. In that article I discussed how ComplianceSecurityTM would have prevented the situation that led up to the abuses and ultimate lawsuit -- if only it had been in place.

In that article I made the following points that go to the heart of the issue of compliance:

P.A.C.E. ProTect with ComplianceSecurityTM tracks, manages, issues alerts, and generates reports on every conceivable risk factor associated with a company's contingent workforce: Tax risks, ERISA risks, EEOC risks, Retroactive Benefits risks, Title VII risks, ADA risks, Unemployment risks, Permatemp risks, OSHA risks, Security risks, Workers Compensation risks, Intellectual Property risks, Visa risks, and the list goes on.

If a company's Legal Counsel can identify a risk factor, P.A.C.E. ProTect with ComplianceSecurityTM will track it and manage it.

ComplianceSecurityTM manages all types of contractual staffing arrangements, including sole proprietors (1099s), one-person corporations, consulting firm employees, and agency temps.

If HP had managed its contingent workforce risk factors with ComplianceSecurityTM it would have certainly avoided a class-action lawsuit. That is because with ComplianceSecurityTM in place a company no longer has to rely on the judgment of front line managers or a vendor management service to manage compliance. ComplianceSecurityTM does all the tracking, alerting, and reporting automatically.

ComplianceSecurityTM even has a built-in procedure for handling internal complaints by contract workers so they cannot be mishandled as was apparently the case with HP. When issues arise they are dealt with immediately by the appropriate authority in a manner that assures full accountability.

Apparently, the abuses alleged in the HP lawsuit are not confined to HP. Here is a quote from a comment submitted by the moderator of a SF Bay Area high tech e-mail discussion group:

I might add that about a year ago, I interviewed with a large company on the Peninsula, where one of the current contractor staff stated in the interview that she was working under the following conditions--40 hours was the max she could bill per week, and if she worked any more to get the job done, the rest would come in 'comp time.' However, the 'comp time' never seemed to be taken, by her or anyone else, and she was working some *insane* hours (70-80 hours/week). Needless to say, I gave it a pass.

P.A.C.E. operates on the principle that independent Contract Professionals and the companies that use their consulting services will both benefit from an open, ethical, and evenhanded alternative to traditional staffing vendors. That's why so many Contract Professionals and companies recommend P.A.C.E.

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Kudos and Testimonials

What People Are Saying About The Contract Employee's Project

A few nights ago I found the CE Handbook and site. It is as though you assessed my own needs and delivered the product to meet them. Thank you! Again, I wish I could send you a recording of my HUGE SIGH OF RELIEF when I found the CE Handbook site. -- L.E.

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Marketing Tips

How Do YOU Get Gigs In Today's Economy?

Many Contract Professionals are reporting that agencies and client companies are pressuring them to lower their rates, sometimes offering rates as low as 50% of what they were earning only one year ago. These same professionals report that jobs are extremely hard to come by, and many report being out of work for as long as six months to a year at a time.

Yet, a minority of Contract Professionals report just the opposite. They are in constant demand, earning as much or more than they did a year ago.

Wazzup? Why does one contractor take a big hit in earnings while another contractor who does the same work consistently stay gainfully employed at high billing rates -- even during the worst of economic recessions?

About twenty years ago I read a book about outside sales that hints at the reason. It made a startling observation. The best salespeople, it explained, actually do better in bad times than in good times.

The reasoning goes like this. During boom times when there is a lot of low-hanging fruit, everybody and his mother gets into the game. But, when the economy turns sour, and the low-hanging fruit disappears, the low fruit pickers fail. They never learned about ladders, let alone how to climb one, so they are utterly ill equipped to go after the hard-to-reach fruit high up in the skinny limbs.

The Sales Pros, on the other hand, have been working in the skinny limbs all along, so when the economy sours they hardly miss a beat. If anything, during bad economies the pros actually have less competition than there was before, and the pros thrive.

During good times the best sales people do very well, but they have a lot of pesky competition from a multitude of fair weather salespeople who have entered the market to pick low hanging fruit. We used to call these types "order takers" because they couldn't sell themselves out of a paper bag if it was sopping wet. All they did was wait for the phone to ring so they could take the customer's order.

Order takers wouldn't know a value proposition if it bit them. They sell features instead of benefits, and they talk way more than they listen. And networking and relationship building? Who needs 'em. Heck, who needs to know how to sell when the customers are beating a path to your door?

Well, the sales pros are honing their selling skills even during the best of times. They know that economies cycle, having been through a few cycles themselves, and they know how important it is to build solid relationships during the upswings so they can rely on those same relationships to carry them through the downswings.

The pros know that while they will always do well during an upswing they stand to do even better when the economy sours and those pesky fair weather salespeople crawl back into their holes.

There is no denying that we are experiencing very trying times. Skilled workers, especially high tech workers, have been displaced by the dot bomb fallout, by the importation of low-paid H-1B and L-1 visa holders, and by the outsourcing of skilled jobs to countries outside the United States.

P.A.C.E. has also suffered from the crash. This past September the San Francisco Business Times named P.A.C.E. the fourth fastest growing private business in the San Francisco Bay Area. The S.F. Business Times reported that P.A.C.E. revenues grew by 528% between 1999 and 2001. Yet, during 2002 P.A.C.E. revenues grew by only 25%.

That's right. P.A.C.E. grew by 25% during a year when ordinary staffing agencies across the country were tanking. How could that be? Was it luck? Or do the Contract Pros at P.A.C.E. know something about selling their consulting services that even the staffing vendors don't know.

I believe that P.A.C.E. grew by 25% in 2002 because P.A.C.E. employs exceptional Contract Professionals who know how to sell themselves to prospective clients.

During the coming weeks we will be contacting our P.A.C.E. Division Managers, and we will ask them how they have managed to stay gainfully employed on contract assignments throughout this terrible recession. I have no idea what they will answer, but I am sure that all the readers of this newsletter will want to know what they have to say.

Have you, yourself, been fortunate (or skillful) enough to stay employed at your standard billing rate? Won't you please take a few moments to let us know how you did it? Click on this e-mail link, and share with us what you believe you did differently that has allowed you to locate contract work and maintain your standard billing rate.

Please respond only if you have been successful at locating work. We want to know what successful consultants do to get high-paying gigs during a bad economy. We will publish the best answers in future issues of the Contract Employee's Newsletter.

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Contract Employee's Glossary

Terminology For Contract Professionals
More terms from Appendix B: Glossary of Terms for Contract Professionals of The Contract Employee's Handbook.

Network
A support system consisting of past, present, and potential colleagues, coworkers, supervisors, subordinates, mentors and mentees, vendors, and clients. Contract professionals build and maintain a powerful, professional network with which they share information and job leads. Contract professionals who develop and maintain a powerful, professional network virtually guarantee that they will have all the contract work they can manage.

Networking
A supportive system of sharing information and services among individuals and groups having a common interest. The process of building and maintaining a powerful, professional network.

News group
A discussion group on a specific topic, maintained on a computer network. Participating in newsgroups related to your skill set is an excellent way to keep up to date on industry knowledge and build your powerful, professional network.

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P.A.C.E. News

UnumProvident Selected By Fortune Magazine As One Of The Top Ten Most Admired

We at P.A.C.E. is proud of our relationship with UnumProvident, the company that provides every employee of P.A.C.E. with guarantee issue Long Term Disability Income Protection Insurance and Life Insurance.

For the third year in a row, UnumProvident has been selected by Fortune magazine as one of the Top Ten Most Admired Life and Health Insurance Companies in America.

Fortune bills its list of America’s Most Admired Companies as the definitive report card on corporate reputations. The list is in its 21st year.

Full survey results will be published in the March 3, 2003 issue of Fortune magazine.

Click here to read a news release about the recent Fortune ranking.

P.A.C.E. is a Win - Win - Win - Win Solution for Downsized Employees, Contract Employees, Independent Contractors, and Client Companies. Check out P.A.C.E. for the best benefits package available to ANY Contract Professional ANYWHERE in the USA.

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The Contract Employee's Project

The Contract Employee's Project is the larger context under which the following interrelated vehicles operate to promote and defend the interests of Contract Professionals:

  • The Contract Employee's Handbook
  • The Contract Employee's Newsletter
  • The Contract Employee's Workshop
  • Professional Association for Contract Employment (P.A.C.E.)

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Copyright and Publication Info

Copyright (c) 2003, James R. Ziegler. All rights reserved.

You may copy or forward this free publication provided it is left intact with all links and this notice unchanged. Any unauthorized duplication, including republication in part or in full for commercial use, is an infringement of copyright.

Published by:
P.A.C.E. - Professional Association for Contract Employment
1355 Willow Way, Suite 244
Concord, CA 94520
USA
http://www.pacepros.com/

Editor:
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
(925) 680-0200
CENewsletters@pacepros.com

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Disclaimer

The Contract Employee's Newsletter is designed to provide information in regard to the subject matter covered. Use is granted with the understanding that the publisher and authors are not engaged in rendering legal or financial advice. If expert assistance is required you should seek the services of a competent professional.

The purpose of this information is to educate and entertain. The publisher and contributors shall have neither liability nor responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly, by the information contained in this Newsletter or by information contained in any web site or resource referenced by citation or hypertext link within the pages of this Newsletter.

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Sign-off

I hope you have found the information in this newsletter to be interesting, informative, and provocative. I encourage you to share the CENewsletter with your friends, colleagues, coworkers, clients, and agency recruiters.

Why clients? Because you need every ally you can get. Why agency recruiters? Because they need to know the jig is up.

Wishing you success in your contracting career,

James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment

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