My Boss Was Crooked! Part IV: Showdown

When I left off in Part III my coworkers and I had become enmeshed in a web of labor violations, broken promises, and unfair treatment of workers that had grown too big to ignore.  If you missed the opening misadventures you can start with Part I here.


The boss had just offered Kyle a second 1099 contract that we definitely now knew was illegal—the only question was what to do about it.  After Kyle’s meeting we held a quick powwow in my office and I could tell how worried he was, not only because of the legal issues, but because he felt singled out as the only worker at the company being paid on a 1099.  We needed a plan, and we needed one fast.

First thing the next day, we decided, I would message the boss informing him about the tax laws and giving him a chance to change Kyle’s contract.  We decided that I would be the one to do this for two reasons:

  1. I understood the tax laws better and could more thoroughly explain them to the boss, and
  2. I’d just come from my interview for JET and it had gone really well, meaning I had a backup plan in case my job security got messy.

We discussed the plan, confirmed it that night, and set it into action.

 

The Message

Here’s a line-by-line copy of what I sent the boss first thing the next morning.  I drafted it out the night before to save time, confirmed it with Kyle over the phone, then emailed it to myself for easy download to my work PC.  (The links go to the actual IRS documents I included with the message)

Good Morning [Boss] — yesterday Kyle mentioned that he had his 4-month meeting with you, and that you offered him a second contract to be paid as a 1099 employee.

We believe that you’re confused about the American employment laws in this case.

The IRS has some very specific rules to decide which kinds of workers are employees, and which kinds of workers are independent contractors.  The difference depends on how the employee works, and who controls that employee.  The company does not get to decide whether the person is a W-2 employee or a 1099 contractor.

I highlighted this information from the IRS instructions that explain how to classify Kyle’s job.

For example, if the business requires the worker to follow certain rules or do the tasks in a certain way at a certain time, then the worker is a W-2 employee.  Also, if a company trains a worker to do some new tasks, then that worker is a W-2 employee.

We talked to our friend who is an accountant about this back in January and did some research, but we decided to keep quiet about that because Kyle’s 4-month contract was almost finished, and we both thought that you would hire him as a W-2 employee after that.

I recommend that you talk to your CPA about this before you make Kyle’s contract, because the CPA can explain this clearly.  The IRS has these rules because employers have to pay the payroll taxes for all of their employees.

However, if you don’t agree with this and want to keep paying Kyle as a 1099 independent contractor, then Kyle agreed to sign that contract and continue working for that time.  The IRS has a special form (Form SS-8) that workers can fill out explaining their job situation and about their company, and then the IRS will make the decision about whether the worker is an employee or independent contractor.  You can see those questions here.

In this case, Kyle and I will fill out that form and send it to the IRS.  A few weeks later, the IRS will send a letter to Kyle, and a letter to [Company Name] with their decision.  If the IRS decides that Kyle is a W-2 employee, then the company will have to pay his payroll taxes for 2017 and 2018.

But, I recommend that you talk to your CPA first. The HR consultant will know about these rules also.

 

The boss saw the messages right away but said nothing.  Then, an hour later, he messaged me back.

He wanted to have a meeting.

 

The Three-Hour Mindmelt

My first meeting with the boss lasted nearly three hours, from 11am until just before 2pm, running through our usual lunchtime.  It wasn’t just the length that made it exhausting—the boss had a habit of frequently changing the subject during meetings, often diverting the conversation to a department-related issue that I had to listen to before I could steer him back to the topic at hand.  Much of what we talked about in that first meeting involved the boss’s business philosophy and the way he treated his employees, which I’ll relate here because it provides real insight into how he viewed the world.  Unlike my last meeting in Part III, this time I remained calm, collected, and in control.

The boss began by saying that I wasn’t Kyle’s supervisor and had no say whether the company hired him—a defense he’d almost certainly planned in advance.  I countered this easily by throwing up my hands in surprise and saying he’d clearly misunderstood my message: the issue wasn’t whether the company chose to hire Kyle, but whether they followed the tax laws in processing his paperwork.

Score one for the Rogers brothers!

 

The Plot to Instill Doubt

Making this distinction caught the boss off-guard, putting me in a better position to explain the legal differences between W-2 employees and 1099 contractors since he seemed not to have read the sheet I’d sent him.  His response was evasive: he claimed that the 1099 laws were looser than I thought they were, but in any case, I wasn’t an expert, and neither was he, so he was going to have a talk with the accountant.

It’s interesting to note that in my earlier meeting with the boss he’d also been quick to tell me that I wasn’t an expert in overtime law—a defense he’d go on to use against me and other coworkers several times.  His intentions here were pretty simple: by claiming that I wasn’t an authority, he hoped to establish doubt in my mind, which would then lessen my resolve and make me hesitate when confronting him.  Meanwhile, if the boss remained firm in his convictions while I secretly doubted myself, he could make me give up the fight and he’d emerge the victor, even if he was wrong about the laws.

 

Maybe No One’s Right

The boss then went a step further and reverted to a second argument he subsequently used many times afterward, suggesting that in an age of alternative facts there was no real answer to the issue at hand:

“Maybe I’m right, and maybe you’re right—we could sit and argue about this all day.  But that won’t get us anywhere now.”

Here, the boss was diverting the argument away from the law and framing the issue as a difference in opinion, in which the laws I’d pointed out were irrelevant.  Under this new framework, everything was up for debate and the laws had no basis in how people had to behave.

Step back and think about that for a minute—I told the boss that he was breaking the law, and he tried to convince me that this wasn’t important. That’s pretty fucked up.

 

Above the Law

From here I was able to steer the boss onto company policy in general, along with whether the company followed US law when it conducted business.  I asked him bluntly, “Does the company follow the law?”

The boss’s response didn’t really answer the question.  “Running a company is very complicated, and of course the most important thing is for the company to always make a profit and continue expanding….”

I wasn’t buying it, and repeated my question more firmly.  “Does the company follow the law?”

This time the boss saw where I was going, and caved.  “Yes,” he said.  “Of course the company always follows the law.”

I found the boss’s initial reluctance to acknowledge the law pretty disturbing: he seemed to see laws not as absolutes to be followed, but as obstacles to be navigated and worked around as a company worked toward profit.  To illustrate why this was a poor idea, I explained how breaking the law could get the company in trouble, then compared the law to a line drawn in the sand. While companies weren’t allowed to actually cross this line, they were of course free to move as close to the line as they possibly could in their quest for profit.  In the case of the 1099 deal, I argued, the boss had stepped over the line, as the laws clearly stated.

Though I repeated this analogy of the law as an uncrossable line several times, future encounters showed that the boss clearly didn’t take it seriously.

 

The Most Important Thing is That the Company Benefits

From here I was able to bring up some other recent problems: our lack of sick days, no health insurance, and Stu’s request for a raise.  In response the boss talked about how we were living in an era of successful companies, and that he’d always admired the big American tech companies like Microsoft, Apple, and Google that had built up enormous success from nothing.  This, he claimed, was why he’d chosen to open up a business in the U.S.

The most important thing, the boss maintained, was that the company grow larger and make a profit, and right now the company needed to save money on employee costs, which was also why it couldn’t afford to give its employees raises or benefits.  In the future, he insisted, if the company grew larger and more successful, then everyone could get the benefits I was talking about.

This argument sounded to me like a watered-down version of 1980s trickle-down economics, and seemed especially dangerous because our company was an LLC with just two owners: the boss and his wife, who stood to gain more personally from the company’s success.  It was entirely up to the boss how much of the company profits went back into the company (in the form of more inventory, new equipment, etc.), how much went into employee benefits (in the form of higher salaries, sick days, etc.), and how much went into the boss’s own pocket so that he could buy his wife a $75,000 Tesla or take his family on multiple vacations per year.  People who run companies every day make choices, and in the boss’s case he was choosing to give us the worst deal he could get away with.

I explained that the big companies the boss admired shared their success with their workers in the form of higher salaries, more benefits, and improved working conditions.  Not only did this create an environment where everyone could benefit, it also kept workers happy and eager to stay at their jobs, where they’d gather more skills and the company wouldn’t have to spend a lot of time and money training new people.

Of course, the ideal situation would be for companies to generously offer these kinds of benefits on their own, but in the absence of such generosity, workers needed minimum wage laws, mandatory break laws, mandatory benefits, and other protections to improve their lives instead of letting the business owners take home all the profits while the workers got screwed.  I asked the boss directly, how successful did the company have to be before it would pass on raises and other benefits to its workers?

The boss didn’t have an answer for this.  Instead, he repeated that right now, the company still wasn’t doing well enough to give out raises or other benefits.

(Also, can I just say again that the boss’s wife drove a $75,000 Tesla bought with company profits?)

 

A Better Environment for Everyone

Part of the problem, I suspected, was that the boss wasn’t familiar with the benefits and working conditions that most other American employees offered their employees: things like sick time, health insurance, and flexibility in taking vacation time.  I brought up a company like Market Basket that I’d worked for back in high school that famously offered its employees profit-sharing and retirement packages, thus creating an environment where employees felt comfortable and naturally inclined to stay.

The employees at our company, I argued, not only needed benefits to incentivize them to stay, but they also needed a structure that was consistent and fair to everyone: Kyle should be paid using the same standards as everyone else, Stu should be compensated fairly for the work he actually did, and everyone should be paid for their overtime according to the same rules.  Without a real structure to keep everyone on the same page, the company was treating its workers like dogs on a treadmill in pursuit of a dangling carrot, always subject to the boss’s whims.

These were things that employees would carefully consider when they thought about whether they chose to stay, including (I heavily implied) whether Kyle, Stu, and I chose to stay.  I told the boss I’d also heard a lot of complaints from the Chinese employees, and part of the reason I was talking to him was that the Chinese workers felt reluctant to confront him on their own.

The boss’s response to this was surprisingly defensive: he immediately said that everyone was happy working at the company.  If I’d heard complaints from my coworkers, he insisted, it must have been because I’d just caught them on a bad day.  Here, once again, the boss was taking a firm stance and trying to discredit other information to make me doubt myself: if he could convince me that he was right and the others were wrong, or at least establish doubt about whom to believe, he’d have won the argument.  (For perspective, I later repeated the boss’s claims to another coworker who said it was the most ridiculous thing he’d ever heard in his life.)

Nevertheless, the boss at least listened to my suggestions for setting up real benefits and structure, thus giving me some hope that we could make things better.

 

“Only Come to Me”

The last aspect of the meeting I’ll share is the one I found most disturbing, particularly because of how many times it came up later.

The boss didn’t like all of us employees talking to each other.  He didn’t like me talking to Kyle about the 1099 rules, didn’t like Kyle and I talking to Stu about how much we got paid, and didn’t like me talking to the Chinese workers about their working conditions.  “All that talking isn’t good for the company,” he insisted.  “Because when employees start talking, before long they’ll start to form a union!”

It was definitely the boss who mentioned unions first: I’d been careful to describe my talks with other employees as being anything but a union, though the National Labor Relations Board uses the phrase concerted activity to describe the type of informal group discussions we’d been having. Luckily for us, the law protects discussions like these just like it protects motions made by actual unions!

I naturally knew that a lot of companies dislike unions because they force companies to offer better working conditions, though I was surprised to hear the boss openly announce that a union would be bad for the company—a more accurate statement would have been that a union would have been bad for him personally, but good for everyone else.

If there were problems in the workplace, the boss said, he didn’t want us employees talking to each other.  Instead, he said, we should only go to him, and he would settle things on a case-by-case basis.

This case-by-case basis meant that problems would be settled behind closed doors, one-on-one, without putting anything in writing, and employees would be expected to keep these case-by-case bargains a secret.  That way, if the boss offered a better deal (say, a raise) to one employee behind closed doors and that employee kept it a secret, then none of the other employees would feel cheated for being treated differently.

 

Workers Unite!

I left the meeting hungry, exhausted, and aghast at what I’d heard—the boss had described a working environment where he held all the power, workers weren’t supposed to discuss their problems, the laws didn’t matter, and everything I brought to him was just opinion.  I was not only pissed, but also shaken.

I needed to get out of there, so I drove to a convenience store a few miles away and ate my lunch in the parking lot where I could be alone.  That’s also when I texted Kyle and Stu about meeting after work at my apartment, since I needed to fill them in on what had happened.

That evening we sat around my kitchen table drinking water and eating Cheez-Its (I hadn’t done my weekly grocery shopping yet) while I told them what the boss had said at the meeting.  It had become clear that we were dealing with a potentially dangerous situation: not only was the boss willing to ignore the law, but he was determined to take advantage of each employee to the fullest extent he could, avoiding overtime, withholding raises, refusing sick days, and taking away bonuses.

It was then that I realized how idiotic I’d been not to see all of this sooner, and knew I should never have even mentioned the company job openings to the others.  I recommended that both Kyle and Stu start looking for other jobs right away because I knew we couldn’t depend on making things better.  None of us knew whether the boss would actually change Kyle’s 1099 contract, but if he refused, we were determined to send the reporting form to the IRS.

 

Things Happen Really Fast

A lot of things happened over the next two days.

The first was that the boss called a meeting with Stu, where he offered to give him more skilled tasks that would get him out of the warehouse.  He also acted newly sympathetic to Stu’s needing more money to pay his bills, though when the subject of a raise came up again, he said that would depend on how well the company did over the next few months.  Instead of a raise, the boss said, Stu could look forward to potentially getting a quarterly bonus at the end of March.

Stu wasn’t supposed to talk about the March bonus with other employees, though, because it was a secret.  Also, the boss didn’t want Stu talking to Ian about workplace issues, because Stu should be coming directly to him instead.

Then the boss and his wife left the building and were gone for several hours.  I suspect they were meeting with the accountant.

That evening the boss had a meeting with Kyle, where he mentioned that Ian had done a lot of research into the 1099 issue but that Ian was wrong and Kyle could legally be paid on either a 1099 or a W-2—a statement he offered zero proof for.  However, because Kyle had seemed upset, the boss had decided to change his contract to a W-2—not because he was required to, of course, but simply out of the goodness of his heart  Also, the boss had retroactively changed Kyle’s pay from 1099 to W-2 for the previous year—again, not because he legally had to, but just because Kyle had asked.

Finally, Kyle wasn’t supposed to talk to Ian about tax issues, or about any other workplace problems.  Kyle was only supposed to come to the boss about those.

The next day the boss’s wife came to me with an updated W-2 form correcting the meal reimbursement mistake I’d mentioned to her weeks ago.  She’d talked to the accountant, she explained, but the accountant had explained a lot of things really quickly and she didn’t understand what he’d been talking about, so she’d decided to just change the way the taxes were calculated and issue new W-2 forms for everyone in the company.  Again, this wasn’t because the company had made a legal mistake—they’d just done it to make me happy.

It had been an insane 48 hours, but we weren’t out of the woods yet.

 

“We Don’t Bring in Outside Groups”

The boss had one more person he needed to meet with: me.

He called me into his office on Friday morning without any notice, just when I thought I’d be able to make it through the weekend without any more craziness.  The boss was surprisingly direct about why he’d called me in: in my message about Kyle’s 1099 contract, I’d also mentioned a certain form that we would send to the IRS.  (This was the SS-8 form, which workers can use to answer questions about their jobs so the IRS can decide their 1099 or W-2 status.)  The boss needed to make sure that we hadn’t sent that form.

Sending that form would be a very bad thing to do, he told me.  A lot of trouble could come from our sending that form, since many people depended on the company for their income, and their working visas.  My coworkers had settled into their lives in New Hampshire; many of them had bought houses and started families.  I didn’t want to put all that in jeopardy, did I?

The boss also explained that sending the form was wrong because the company didn’t bring in outside groups to deal with these kinds of problems.  If any of us had a problem with the company, he said, we could always come to him, and he would sort it out without the IRS or any other outside groups.

I found this enormously unsettling.  Kyle and I had no plans to send the SS-8 form now that he was a regular W-2 employee, but the boss was clearly afraid of what would happen if we did.  He talked as if our sending the form could bring down the whole company in a puff of smoke, and I realized then that whatever tax fraud the boss had committed went way deeper than a few 1099s.

I’m also not going to lie—the boss’s blatant attempt to play the sympathy card by bringing up my coworkers got to me.  Two of my coworkers were expecting kids, and another had just bought a condo.  Several others were currently in the States on working visas, and if they were willing to accept shitty working conditions to make those lives possible, I didn’t want to be the one to bring all that crashing down.  Unsure of what else to do, I played along by saying that of course I’d go to him first to make a deal, as long as he was willing to actually make that deal.

At this point the boss seemed to offer me a bribe: he compared our situation to two people getting into a car accident.  Sure, he said, we could bring in lawyers and the government and the police and argue about whose fault it was (again came that statement, “We could argue about it all day”), but in that situation wasn’t it just easier just to write a check for a thousand dollars and call it even?

I didn’t like where he was going and responded with a metaphor of my own: sure, writing the check would be easier, unless of course one driver had blatantly rear-ended the other and was now trying to throw him a check for a thousand dollars when he’d done ten thousand dollars worth of damage.

The boss’s face fell at this, and it was clear that he finally had to listen to me.  We spent the next two hours (!) talking about benefits and a company structure that ensured everyone was treated fairly, laying out clear guidelines for raises, tracking everyone’s vacation days the same way, and offering sick days to everyone.

I dwelled on the sick day issue because I saw it as the cheapest and easiest way for the company to offer an important benefit that protected employee’s health.  I emphasized the importance of sick days and painted a graphic picture of the stomach troubles I’d had after my India trip, as well as of my coworker who’d worked feverishly at his desk rather than call out of work, and how that all needed to stop.

During this talk I kept quiet about the New Hampshire law I’d uncovered stating that companies can’t deduct pay from salaried employees who take sick days.  Not everyone in the company was on salary, and I wanted to win sick days for all the employees because it was the right thing to do.

These were the battle lines I’d drawn, and the boss told me he’d think about them.

 


Will I succeed in my quest to barter better working conditions and sick days for my coworkers?  Find out in Part V, and be sure to keep in touch!

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