Credit: Paul Johnson Drywall Inc.
In 2012, the Department of Labor approached Paul Johnson Drywall Inc. to review our employment practices and compensation structures as part of its worker misclassification initiative. What began as an investigation of employment relationships and pay practices ultimately matured into a cooperative, educational experience that has benefitted my employees and business while raising the bar for the construction industry.
Prior to the department’s investigation, like most businesses in the drywall industry, PJD primarily paid piecework to 1099 labor, subcontractors and other third-party labor providers. During the past few years, it has become very clear that there are disadvantages or “unintended consequences,” if you will, associated with this industry standard. They include deliberate or unintentional misclassification of workers which can make a business run afoul of labor and other laws, a lack of employee loyalty to the business and unpredictable output from workers. Each of these can adversely affect the company’s bottom line.
Building Organizational Capabilities
While I believed our prior employment practices were fair, being disconnected with our labor compounded various stresses. Following the examination by the Labor Department, we expanded our employment model to include all of our workers as direct employees of our company, and established direct connections with crews.
Our crew members are now paid hourly, while our crew leaders are paid piecework with overtime should they work more than 40 hours in a week. This model has resulted in PJD paying consistently higher wages than our competitors. I am proud to say that our crews are now among the highest average wage earners in the industry. Additionally, we provide all employees with outstanding benefits, which were previously unknown in our industry, including health care and paid vacation.
Enhanced Employee Loyalty
Our increased compensation and direct employee-management relationship structure has enhanced employee loyalty, thereby reducing turnover and providing an enormous level of stability. Strong employee loyalty delivers a major strategic benefit for my company’s bottom line. Benefits include:
- Increased productivity and quality gained from continuity of workforce.
- Lower costs for administration, overhead, safety and compliance training.
- A more static cost structure resulting in better forecasting and more predictable level of profit.
Increased Efficiency from Technological Innovations
Bringing all of our workers in-house to increase compliance with labor laws compelled PJD to put its brightest minds to work on controlling costs. At PJD, our human resources and compliance teams have collaborated with technology developers to create and implement an electronic data capture program. This new, advanced tracking program:
- Provides direct scheduling to employees.
- Monitors when employees are on a job.
- Records work time and tasks.
- Automatically pushes the recorded data to our accounting system.
These technological innovations allow us to more effectively schedule, predict and control labor costs, while also providing industry-best compliance with federal regulations. These innovations exemplify how PJD’s progressive approach is adding value to our employees, company and customers.
A New Company
While many advised me to approach the Labor Department investigation with apprehension, I am pleased with the outcome that resulted from cooperation and partnership. Today, our crews are among the safest, best trained, most productive, and most loyal in the industry. My business is more efficient than ever and is adding greater value to our customers. Reforming my business structure was costly and difficult in the short term, but it proved to be a profitable long-term investment. I strongly encourage businesses to evaluate their current employment model and consider the benefits of a more sustainable and profitable strategy.
Cole Johnson is president of Paul Johnson Drywall Inc., an Arizona-based drywall contractor with operations in Nevada and New Mexico. He is a committed advocate of Labor Department initiatives.