Berghorst Enterprises: Flat Fee Model or Employee Status?

anonBerghorst Enterprises (Berghorst) rolled out their Flat Fee Model Friday (28JUN13) with demands that Contractors agree by Monday (01JUL13).  While timelines are not novel in the Property Preservation Industry, this is the first time I have come into possession of documents, upon Corporate Letterhead, which appear to spell out a definitive violation of the separation between the status of  Independent Contractor and Employee.

Overall, I am gravely concerned about the future of the Property Preservation Industry; for freedom and liberty.  That is why I have opted to Publish the below documents and additional ones in follow up Articles.  For far too long, the Property Preservation Industry has taken the position that Independent Contractors have no Rights.  I am hopeful that Contractors, after reviewing this material, will reach out to their local Departments of Labor and Representatives and say enough is enough!

From the Internal Revenue Service (IRS):  You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

The reality is that every single Order Mill dictates what will be done and how it will be done — they also dictate when it will be done and where it will be done!  Berghorst has thrown a new curve ball:  Your bids are no longer your own bids.  In a document obtained by Foreclosurepedia titled “…the new 2013 Vendor Agreement and Pricing…” Page 2 states, in pertinent part,

Vendor Bid Calculator
The key to making consistent profit margins in our industry (and in any construction related business) is to be efficient and competitive in bidding/estimating. Estimating and bidding competitively and consistently achieves two things; a client that has confidence in us (uses us more often and questions our bid prices less) and a higher percentage of bid approvals (more sales in your pocket by being consistent and efficient).

The Vendor Calculator is a tool to help you with bidding either on the fly or within your office. It is a simple tool that allows you to input your material costs, labor costs, and any additional cost for circumstantial situations and then allows you to get your Profit and Overhead (P&0) numbers to …… be sure you are bidding competitively but also make the industry standard P&O. Through research we have found that the standard P&O at a vendor level is between 10 -20% on most items. It is also proven that the higher the invoice amount the lower the percent of P&O should be in order to remain competitive in the market. We understand that for lower priced items it is hard to see how 10-20% P&O is going to work but again this is based on per item and we have to remember to take it as a total over the longer term. There is an additional instruction sheet that shows how to use the tool. The Berghorst Office will be using this tool as well with the goal of reducing our denials on bid items for having excessive bid pricing.

In summary, and as noted on the Pricing and Payment Policy attached, the overall strategy is designed to provide for more level and consistent pricing and profit for both Berghorst and Vendor.

Berghorst has rolled out the Dog and Pony Show and called it Profit and Overhead (P&O).  While it is laudable that Berghorst seems so concerned that its “Vendors” get with Berghorst’s Program and succeed, it is not within their purview.  First, Berghorst cannot legally tell any Independent Contractor what they must bid!  It is a Contractor’s LEGAL RIGHT to bid what they want!  Berghorst is allowed to turn down the bid; Berghorst IS NOT LEGALLY ALLOWED TO TELL A CONTRACTOR WHAT THE MUST BID!!!!!  This is precisely what they are doing.  Second, whether or not an Independent Contractor elects to “competitively” bid is at the SOLE DISCRETION of the Independent Contractor.  In a nutshell, Berghorst is dictating not only how the bids must be submitted, but also the precise price points!  The Vendor Calculator, in my opinion, is a piss poor attempt to at best consolidate interstate bids and at worst price fix.

Upon the request of BE, LLC, Vendor shall immediately remove any of Vendor’s representatives or subcontractors performing services under this Agreement and replace such representative or subcontractor as soon as practicable. Upon the request of BE, LLC, Vendor shall promptly, and after consultation with BE, LLC, address any concerns or issues raised by BE, LLC regarding any of Vendor’s representatives or subcontractors performing services under this Agreement, which may include, as appropriate, replacement of such representative or subcontractor and prohibit such representative or subcontractor from completing any additional BE, LLC work. Vendor shall be responsible for the performance or nonperformance of its subcontractors as if such performance or nonperformance were that of Vendor. Vendor shall require all subcontractors to be bound by provisions substantially the same as those included in this Agreement. Vendor shall comply and shall cause it’s employees, representatives, and subcontractors to comply with all personnel, facility, safety and security policies, rules and regulations and other instructions of BE, LLC, when performing work at a BE, LLC work site or accessing any BE, LLC systems or data, and shall conduct its work at BE, LLC work sites or on BE, LLC systems in such a manner as to avoid endangering the safety, or interfering with the convenience of BE, LLC representatives or clients.

The above is from the Berghorst Vendor Agreement.  Now, I am neither a lawyer nor rocket scientist; what I am is an Independent Contractor.  The ability of a Company to have Command and Control over my personnel, had I been party to this Contract, would have been fairly blatant.  Here is the true irony:  The Banks hire the Nationals to Order Mill out the work.  Layer One of the Insulation.  The National Order Mills then hire the Regional Order Mills to further Order Mill out the work.  Layer Two of the Insulation.  By the time that a Work Order is actually performed, the Banks are actually receiving about 24 cents on every dollar they pay towards actual work.  That, though, is not the story.

What is the story is that in this Agreement, it would appear that Berghorst is assigning a Doctrine of Privity to Subcontractors!  The requirement that all “…subcontractors to be bound by provisions substantially the same as those included in this Agreement[,]” should be easy to identify by any first year law student.  That is the beauty of law; when smoke and mirrors are applied, the brilliance of the Truth shines through.  Novel, so novel to assign a Doctrine of Privity to Subcontractors!

Forbes just published a hell of an article which stated, in part,

Perhaps a helpful starting question is whether the circumstances of the arrangement lend themselves to independent-contractorship at all. For example, it could be that an organization’s need to control the worker’s activities, taken in conjunction with all of the other operational and managerial considerations involved in meeting the organization’s objectives, could make it difficult to mount a successful defense of non-employee status.

The US Department of Labor has the Wage and Hour Division.  Vice President Joe Biden has actually stood up for the Blue Collar worker’s rights which are being trampled upon time and time again,

The Department’s Misclassification Initiative, launched under the auspices of Vice President Biden’s Middle Class Task Force, is making great strides in combating this pervasive issue and to restoring these rights to those denied them. In September 2011, Secretary of Labor Hilda L. Solis announced a major step forward with the signing of a Memorandum of Understanding (MOU) between the Department and the Internal Revenue Service (IRS). Under this agreement, the agencies will work together and share information to reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws.

At the end of the day, Berghorst’s Agreement is something I would never enter into.  Demand after demand after demand is made — all are one sided in favor of Berghorst.  The demand for release of a Vendor’s Financial Data is probably the most striking I have ever seen!  In fairness, I am anticipating the release of almost all National and Regional Order Mill’s Agreements and anticipate that they will all be nearly identical.  This is where I begin to become extremely nervous.  One of two scenarios creep into my head.  Scenario One is that the entire Industry has become so fearful of having to pay what it owes Contractors that they have hammered out these Draconian Documents which read much like War Tribunal Manifestos.  With liability zeroing in on the National and Regional Order Mills by and through Contractors whom have woken up and want to be paid, they “seemingly” all produced nearly Identical Agreements and Demands and that samesaid occurred within the same time frame.  Scenario Two represents the collusion of multiple party(s) to fix pricing across state lines; to issue demands for waiver of inalienable rights under the Uniform Commercial Code (UCC); and to divert attention from the plausible case to be made that Vendors and/or Independent Contractors are truly Employees under federal law.

While I have my own opinions, I leave the Judgment up to the Reader and the Judicial System.  With that said, if you have information which you feel needs to be brought out into the open, feel free to reach out and let us know!

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