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  • Mandatory Pay Cut to an Independent Contractor? Maryland

    My question involves business law in the state of: Maryland/Florida

    I am a 26 year old MD resident working as an independent contractor for a clothing merchandising company (mainly screen printing) based out of Winter Park, FL. I am the only person in the company that works out of state and out of their warehouse. I seek out clients mainly on the internet but also locally and in person. I am a customer representative and handle customer relations as well as compile invoices and process orders. The company takes care of all the printing, garment ordering, shipping, etc. I am basically a middle man between the client and the labor and shipping process. I have been being paid a weekly base of $325, plus 6% commission on all orders. I do not intercept sales calls or emails so I am in charge of finding all of my own clients for the most part. This makes my job a bit more difficult than the jobs of those who work in the warehouse because I am not intercepting sales calls at all. I am basically a scavenger, working for myself. The more I search and send out sales pitches, the more results I get, and the more money I make. I pretty much work on my own schedule so the job is extremely flexible for me, but I do need to remain extremely attentive to my email and phone 9-5 on weekdays.

    The company is fairly established. It is run by someone who owns many small companies, has multiple locations in the Orlando area, and some of our clients are fairly large corporations that everyone on this forum would be very familiar with, all the way down to small-time bands who only order a few dozen shirts at a time.

    My manager emailed me yesterday morning, insisting that my pay structure change and that it take place immediately. Over the past 6 months or so, there have been a lot of discrepancies which have caused the company to lose money because of re-prints we've had to do and discounts we've had to give out. This is because of misprinted garments, wrongly ordered garments, miscounts in the number of garments, missed deadlines, etc. 90% of these mistakes were of no fault of my own but because of the printing, shipping or quality control department having small oversights. However, the manager insists I take a major pay cut because my clients have been having as many issues as they've been having. He sees the issue in black and white, and figures if my clients are costing the company money, then the solution is to cut my pay and change how things work. He is insisting on changing my job to purely customer service and gathering clients but then handing over my leads to another representative who works in the warehouse physically, who can take it from there.

    Here is a copy of what I was sent initially:

    ----------------
    We have been doing some evaluations on numbers on all reps. From June 1st to August 31st You grossed $22,359.60. On which you earned $5,577.83. Be it your fault or not, there was $2,437.50 in errors/refunds in that time frame on your orders.

    In essence you were paid 27.9% of what came in. Your about 11% above the companies line of cost.

    We need to change the formula of how this works.

    I believe it is a little more difficult for you to control the orders so that errors do not occur. In my opinion, a little of that is the be expected, considering that you are not in house and do not have immediate access to everything/everyone here.

    This leads to many of your clients to speak negatively of you and the company. Both us and you end up looking bad due to whatever variation of errors continue to occur.

    Don't get me wrong, all reps deal with tough clients and unreasonable expectations as well as printing errors. It seems that the frequency with your orders is substantially higher then that of the in house reps here which as I said earlier some of that is to be expected.

    At the same time, it does not really make sense financially or as far as our reputation goes to continue on our current path.

    What we have discussed as a solution is for you to become a lead generator for [company name] and to paid the same commission rate of 8% to do so.

    I will assign one of our in house reps to handle your clients so we can eliminate errors and take some of the tedious tasks away from you to maximize efficiency.

    Basically, you will make the initial contact and all order details and processing will be handled by an in house rep. This takes all data entry,processing, customer service and complications out of your hands.

    I think your best skill set is networking and generating leads.

    As far as your pay is concerned, I said earlier we can not continue our current path as the company is losing based off of the pay structure.

    What we are going to do is eliminate the base for the time being and you will get 8% commission on all orders that you hand off to your designated in house rep. We have been doing this with ------ and some of our reps and have seen it work well. We can evaluate how well this works over the next 60 - 90 days and evaluate if the position constitutes a base at that point. Based off of an acceptable percentage for the company.

    We do appreciate your work here and what you have been doing for a long time with us. The issue comes down to we can not continue to lose on orders and we need to create an environment in which your position can work for the company as well as for yourself.
    ----------------

    After much argument, he agreed to 6% with $75 a week base pay. However, he is not willing to budge from that.

    Now, as an independent contractor, is this even LEGAL for the company to do to me? Instantly, without any prior notice, or even at all?

    What can I do to fight this and STILL keep my job in a legal aspect? Or am I at a loss because I am an independent contractor and he has the freedom to do as he chooses?

  • #2
    If you are truly an IC, then your relationship with your client is a matter of contract, and as such would be settled by small claims court or regular court.

    If your client/employer has not been deducting taxes from your pay please be aware that you are responsible for the payment of ALL taxes, both the employee and employer's share.

    That being said, unless you are contracted with several different clients and are running your own business, the relationship you are describing sounds more like an employee-employer relationship to me.

    See the chapter "Employee or Independent Contractor" here in IRS Pub. 15: http://www.irs.gov/pub/irs-pdf/p15a.pdf

    Comment


    • #3
      I am paid as an IC. No taxes are taken out. I am fully aware of all tax issues. That is not my concern here. Regardless of how the employer and employee treat each other, I am legally an IC and that is how I am paid.

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      • #4
        Then it would come down to a matter of what your contract says about this, and you would be advised to take your contract to a lawyer for advice.

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        • #5
          My original base pay is in the contract, and it was $125 a week plus 6% commission. However, since then (it's been about 3 years now), the boss of the company has given me several raises because of my improved performance. None of those were contractual, but explained either in writing or on the phone. The contract doesn't mention whether the company is able to impose a sudden pay cut for whatever reason.

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          • #6
            Only a contract attorney in your state who has read the entire contract can say whether pay cuts are allowable or not.
            The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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            • #7
              Yes, as you've been told a few times, this is a contract law matter, not an employment law matter.

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              • #8
                IMHO, your job sounds more like an employer/employee relationship than an IC relationship.
                I find that the harder I work, the more luck I seem to have.
                Thomas Jefferson

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                • #9
                  That would be a separate issue. But it's one that the poster might want to think carefully about addressing, at least right away, because if employment law applies, the employer CAN reduce her wage, under both state and Federal law, as long as he gives one full pay period's notice (MD requirement). No additional notice or consent is required.
                  The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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                  • #10
                    Agreed with both Morgana and cbg. This is what I was referring to in my original reply.

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                    • #11
                      My advice is very general but I am in MD and have some expertience with contracts in the state. Typically the contract should have a timeframe. If it has expired, you are now negotiating a new contract and the terms can be whatever you both agree to.

                      The contract should also have some language regarding renegotiating terms. It need not specify pay, but there should be some language that says the parties can sever the agreement under such and such conditions. Typically this is with 30-60-90 days in writing or some such clause. This assumes the original agreement is still in effect and has not expired.

                      It is also possible that by giving you raises in the past that were not in the contract, your old contract is no longer in effect. Essentially by accepting the raises, you "agreed" to sever the old contract and follow a new, albeit verbal one. This situation is going to be very fact specific.

                      Basically, to determine which of these cases you have, you need to take the original contract to a lawyer specializing in contract law.
                      I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.

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