A bill currently before the Wisconsin state legislature, SB 80, would impose unnecessary new burdens on direct-sales-based businesses in that state. It would require these companies to:Â
- treat traveling sales people as employees rather than as independent contractors
- provide additional information to the state on its owners, sales activities and vehicles,
- post a $10,000 bond, and
- tell potential workers in writing where they will work and what they will be paid
Supporters claim the legislation is necessary to protect consumers and sales crews and to regulate an allegedly lawless industry. However, the real motivations behind the effort seem to be a number of admittedly horrific experiences which nonetheless have no connection whatsoever to the regulation of independent contractors.
In one case, a van carrying a group of salespeople crashed when the unlicensed driver tried to switch seats with a passenger after spotting a police car. Seven people were killed and five injured. In another, a saleswoman from Georgia described how she totaled her car and was raped by a colleague. It is difficult to see how classifying the unlicensed driver or the rapist as an employee rather than independent contractor would have had any impact on these events.
Likewise the other regulations in the bill seem either superfluous or unrelated to the stated goals. The government generally already is made aware of a company’s owners through the process of acquiring and maintaining a business license.
A company’s sales activities can only fall into one of two categories: legal or illegal. Illegal activities hardly need to be made more illegal by the enactment of additional laws that make illegal activities doubly illegal. Those business that currently flout existing laws would no doubt flout the new law as well, if it passes.
The great irony in these types of laws is that the businesses most affected are those that currently comply with existing laws – which are not the target of the new laws. These currently compliant businesses are hit hardest by the new laws because they are the businesses – most likely the only businesses – that will actually comply. Reporting legal sales activities to the government would result in additional compliance costs and overhead for the legitimate business. Sometimes added costs of this nature are justified but supporters of the bill have offered no argument to demonstrate that this is one of those cases. The same is true for the registration of vehicles.
The requirement of a $10,000 bond, in order to conduct legitimate business, is astounding. If the business is in some way illegitimate – which even critics are not claiming – then allowing it to proceed seems unethical at any price. Furthermore, requiring a bond might help a legislature feel good, and bring smiles to the operators of bonding companies, but it provides little assistance to the intended beneficiaries, as actual payments under such bonds are commonly triggered only upon a criminal conviction of the wrongdoer, and such convictions are rarely obtained.
The final provision in the bill reflects a fundamental lack of understanding of the independent contractor model and of the requirements of mobile sales. Requiring a company to set geographic boundaries on sales would either result in arbitrary restrictions on the income potential of direct salespeople or in boundaries too broad to have meaning. Likewise, requiring a written agreement setting forth compensation terms, while certainly advisable, seems overly paternalistic and somewhat insulting to the presumably vast majority of direct sellers who possess the modicum of business acumen required to appreciate the importance of reaching an agreement as to terms of compensation before commencing work.
