The Pharmmedix Human Resource Dilemma

The Pharmmedix Human Resource Dilemma
May 16, 2016

Pharmmedix is a pharmaceutical company that employs 13 salespeople to market a drug known as Rejuvanate.   The company has 13 people on its staff that each covers a 50-mile radius as independent contractors.   The relationship between Pharmmedix and the contractors is a relationship of trust as each employee is given the freedom to establish their own working hours as well as manage their relationships with their customers.   According to the United States Internal Revenue service, an independent contractor “has the right to control or director only the result of the work and not what will be done and how it will be done” IRS, (para 10).   Employees are described as those whose services can be controlled by the employer which includes control over details of how work is done.
The independent contractors for Pharmmedix believe they should be considered employees because they operate under the Pharmmedix name and works for only one company.   Further the only clients they serve are for the company, they have received training for their work from the company and the services they provide are an integral part of Pharmmedix’s business.  
There are extensive regulatory controls over the classification accuracy of whether workers are considered employees or independent contractors.   These state and federal regulatory laws are:
  1. National Labor Relations Act of 1935 (NLRA),
  2. Fair Labor Standards Act of 1938 (FLSA),
  3. Employee Retirement Income Security Act of 1974 (ERISA),
  4. Social Security Act of 1935
In the Journal of Financial Planning, Randy Gardner writes “the IRS considers three aspects of control when determining whether a business employs a worker: 1. Behavioral control; 2. Financial control; 3. Relationship of the parties.  
Behavioral Control
Pharmmedix provides little to no instructions to their sales staff and looks to them to create and maintain business relationships...