A Look at the Pros and Cons of Utilizing Independent Contractors vs. Laundromat Employees
With the outbreak of COVID-19, I’ve recently received quite a few questions from laundry owners about wash-dry-fold services.
The wash-dry-fold business has not fallen off during the pandemic. In fact, it seems that some owners in some markets have chosen now as the perfect time to start or expand this full-service offering.
If you are getting into the wash-dry-fold business, one of the common questions you need to answer is whether to have store employees do the work or to hire self-employed independent contractors (“1099 workers”) for your wash-dry-fold accounts.
In my mind, this issue boils down to one main question: is your wash-dry-fold operation truly going to be your business, or isn’t it? If it is going to be your business, you should have your own employees do that work. As a matter of fact, I would avoid 1099 workers at all cost – and here’s why:
Technically, you can’t tell an independent contractor what type of work schedule to keep. For example, you couldn’t limit this worker to doing wash-dry-fold only on certain days and during certain hours. You can’t tell 1099 workers the hours you want them to be there. You can’t require them to work a specific schedule.
As a result, you have no real ability to staff or control your wash-dry-fold business with independent contractors. For instance, you can’t tell a 1099 worker that he or she is responsible for cleaning the store at a certain time every night and then closing up at 10:30, for instance. If you were to do that, you’d be riding a gray area between a 1099 worker and an employee.
Also, independent contractors can’t be required to help or interact with your self-service customers. Technically, they shouldn’t be doing any “laundry attendant work” on top of their wash-dry-fold duties.
Along those same lines, it’s hard to hold 1099 workers accountable to any of your policies, procedures and standards. This is especially important during the current COVID-19 pandemic, where you likely are trying to implement higher-than-normal standards of cleanliness in your store, while enforcing even more stringent rules. After all, you can’t have an independent contractor to sign an employee manual.
You also have little control over your reputation or your brand when utilizing 1099 workers – because, in essence, you have no control over them.
On top of this, with 1099 workers, those wash-dry-fold customers technically aren’t really yours. Yes, you may be taking in the cash and processing those transactions, but the customer is still the independent contractor’s client. Therefore, if they change their mind and decide to work out of a laundromat down the street, they can do that – and they can take those wash-dry-fold customers with them. And you would have no recourse, because they’re not employees. Legally, you can’t get an independent contractor to sign any type of non-compete agreement
However, if you want to go the independent contractor route and essentially have someone running a wash-dry-fold business within your laundromat business, you really should treat it as if it’s their business.
It should be a separate company and a separate brand. And, if someone calls about wash-dry-fold, you should be able to refer that customer directly to that other company.
You also will need to be sure that these contractors have insurance and that they are listing your business as an additionally insured entity on their insurance policy. They are operating a business within your business, and your insurance company is going to want to know that you’re covered for their acts because, once again, it is a separate company.
Also, you will want a contract, which includes some level of accountability and lays out all of the procedures and policies that you’re holding the independent contractor to as a separate business. You want some level of brand protection between the two.
You also should define all of the individual relationships within the business. For instance, if they have people working for them, you want to make it clear that those individuals are not working for you, but instead for the person doing the contracting. After all, you don’t want people coming back to you saying they hurt themselves while working for you if that wasn’t really the case.
You will want some type of agreement spelling out that the contractor is actually a tenant of yours, and you need to outline the exact financial arrangement between the two of you – something you both agree to and can live with. And, of course, you will want to define who the customers belong to.
In addition, be sure to include some type of separation or sales termination language that covers each partner, because at some point the business relationship is going to end – and it’s always better if there is a defined process for ending it at the very beginning.
With all that said, as I stated at the beginning of this article, I would tend to avoid taking on an independent contractor for your wash-dry-fold business.
When you hire employees, you control that relationship with your wash-dry-fold customers, and those customers will remain yours. Plus, your business’ brand is protected. It’s your name on the store, and it’s also your name internally. There’s no confusion about who you are and who owns and operates the business and all of the other services going on internally within your laundry business.
You don’t have that potential of a new competitor just popping up, because it’s very hard for an employee to take away wash-dry-fold customers when those customers are actually your clients.
The other benefit of having employees, versus independent contractors, is the fact that you can train employees to handle tasks beyond just wash-dry-fold services. They can be asked to open or close the store, clean the facility, assist self-service laundry customers and more.
I’ve always believed that a fledgling wash-dry-fold operation was a way to augment a business’ self-service laundry sales. In fact, it’s not until your wash-dry-fold business grows into a larger operation that you’re going to need to have dedicated employees just to do the wash-dry-fold work. Those employees are there primarily to take care of your self-service business – which will be your most profitable segment – and then secondarily they will tackle the wash-dry-fold tasks. This will be the order of things until, of course, you can grow the full-service segment of your business to the point that it’s a significant portion of your overall operation.
[Editor’s Note: This article is intended to provide general information only. Before making any business decisions, be sure to consult with an employment attorney or some other business advisor.]
