In my election issues website, www.lawmall.com/electionissues, I have the following heading for this issue: "The 1st 3 Are Free - Eliminate All Regulation as to the First 3 Employees of Any Business" This issue is a national issue but I discuss it here so you can understand the issue as it is reworded for implementation by towns and villages, the lowest level of government. I have discussed this issue in an earlier lawmall website, Virtual Law Firm Website Describing "1st 3 Are Free" Issue and in my letter to President Clinton Letter to President Clinton Describing My Idea for "The 1st 3 Are Free". As I stated in www.lawmall.com/lm_virtu.html:
The burden of employees on the individual practitioner and small law firm should not be underestimated. The developer of LawMall has tried (without success, it should be noted) to enlist the help of President Clinton to cure this problem for small business and small law firms by urging adoption of the message underlying the rallying cry "The First 3 Are Free!", which would eliminate all rules and regulations as to the first three employees of any employer. * * *
In my letter to President Clinton dated August 15, 1994 I said:
Dear President Clinton:
Jobs, the economy, crime. These seem to be the main problems for most Americans.
There is something you can do to help cure these problems, something which hasn't been discussed before, apparently. "The First Three Are Free!" describes the solution. What I refer to is permitting anyone in the U.S. (such as you, me and General Motors) to hire up to 3 employees without any rules or regulations governing the relationship. The employee would go to the U.S. Post Office for servicing (for withholding taxes, reports, disability insurance and whatever) instead of taking the valuable time of the 1- to 3-person employer. Payments made to the 1-3 employees would include all taxes, which would then be paid by the employee, and the small business employer (up to 3 employees) would never be behind on payroll taxes or reports. Obviously, many of the 1-3 employees would not be earning large amounts because they would be more like apprentices, and there would be no loss to the treasury, but there would be a gain to the small business employer who no longer would waste his/her valuable time with paperwork and unpaid taxes.
These 3 employees would not be subject to any minimum wage requirements, enabling the employer (as to the first 0-3 employees) to pay nothing, less than minimum, the minimum, or more than the minimum. This would create a flexibility for small business to hire persons for apprenticeships without having to pay such persons more than they are worth. The effect of such legislation enabling this proposal would be the opening up of millions of new jobs, many of which would be valuable training programs with small business, which would create many more small businesses and entrepreneurs. Also, this would solve the "nannygate" problem [where Clinton's nominee to high governmental positions had to withdraw because they failed to withhold income taxes for their domestic employees] by eliminating the reporting requirement as to most persons (since the workers would presumably fall within the 1-3 exemption).
Also, I developed the idea again at "The 1st 3 Are Free" Idea as Described in My partially-written eBook DROPPING OUT:
Taxation has made it unworkable for many small businesses to hire any employees, because of the amount of regulation, reporting, withholding and hassles which develop. This has led me to push for a national apprenticeship program under which any person (you, me, General Motors, or the A&P would be able to hire up to 3 people and pay them as little or as much as they wanted, without any reporting or withholding. I call this plan The First 3 Are Free, meaning that there would be no rules or regulations relating to the first three employees of any person (other than not being able to beat, maim or kill them; not being able to hire illegals; not being able to hire children or slaves). As to the IRS, if the IRS wanted, I would make out the weekly paycheck (if any) jointly to the IRS and the special employee, with that check each week being the last thing for which the employer would be responsible for as to the past week's work of the employee. This in effect would be a massive national training program for persons wanting to learn a business as an unpaid assistant or trainee, with the employer being free to pay as little or as much as the employer wanted, which presumably would be enough to keep the employee from going elsewhere, and be a free market for wages unhampered by the nation's minimum wage which deters many employers from hiring anyone. Persons in (or seeking to start) their own small businesses might be able to retain one or more assistants by making them independent contractors or partners, to avoid having to withhold and pay income taxes. But make sure you clear the specifics with an attorney or tax person before doing this, to avoid problems with the IRS.
The regulatory burdens are substantial, especially because anyone who is hired as a 1st, 2nd or 3rd employee is not wanted as a person hired to perform the substantial amount of added paperwork (tax forms, tax withholding, insurance for disability, insurance for unemployment, posting of notices for all 1-3 employees to read, ad infinitum). The unfortunate thing about this burden is that it falls on the only product person in the small- business organization, the person who is trying to found a new business based on a new idea for the purpose of providing good jobs for the community and a good profit to the owner. Federal and state law has imposed a near death sentence on small business growth by this excessive amount of regulation, which has discouraged most people in the U.S. from going into business for themselves, and instead they have elected to take whatever they can as a job, such as $8/hour from Wal-Mart for a partial work week of about 26 hours or so. By taking this burden off of small business, there would be the creation of perhaps 1 million new jobs in a very short period of time, perhaps within one year. Of course, this would not be good news for Wal-Mart or other major corporation, which would feel threatened if a majority of Americans had an opportunity to go out on their own to engage in business in competition with the monopolized businesses of big business.
As a result of national politics, it is a sure thing that my idea for "The First 3 Are Free" cannot be enacted into law, even though it cries out for enactment.
Well, is there some other way of accomplishing this? I believe so, and got the idea for this on December 13, 2005, when driving to Tunkhannock, Pennsylvania to meet with a group of voters opposing a new Wal-Mart Super Center across from an existing Wal-Mart.
Town, Village, County as Employer of Record for 1st 3 Employees of Local Businesses.
Any town, village or county could be a major force in creating new, good jobs for local residents, and good business prospects for local businesses. All the town, village or county needs to do is to become the employer of record for the first 3 employees of any local business. This would allow any local business to have up to 3 employees at any one time without having to comply with any of the massive paperwork requirements imposed on businesses by federal, city, state and some local governments. These requirements are so costly for many small businesses to me, both from a monetary standpoint as well as a time standpoint (the time of the small business owner) that many small businesses elect not to expand and create jobs because of this employment hassle. All the town, village or county needs to do is to function similar to an office temporary employment company and comply with the various reporting, insurance, withholding and numerous other requirements applicable to all employers of record. This would free up the time and reduce the costs of the local small businesses. The town, village or county should charge only the direct costs of an employee (including withholding payments, disability insurance costs, unemployment insurance costs), but not the administrative expense of the program, which should be small. Perhaps the cost of one fulltime or parttime employee and the charges by a payroll service. Of course, there could be an attempt to pass on the actual expense to the small businesses, but I believe this would be self-defeating. Let the town do something for small businesses for a change. It has already financed the major retailers to come into town to put these small businesses out of business, and it is time that the community do something, at community expense, to try to save the remaining small businesses, and encourage others to get started. This can be done by making the hiring of employees easy and at low cost for the local small businesses. This is not an effort at all to drive the wage rates down. When small businesses hire local workers and find out that they are profitable for the small business, you can bet your bottom dollar that the small business (in contrast to a major corporation) will be providing suitable pay increases to the good employees to keep them from going elsewhere. All of this is beneficial to the town, its residents, property values, the town's tax base, and local small businesses, and bad for major corporations that have set up an unwieldy system that makes it difficult for small businesses to compete against them. I view this as a most important local issue that could win a local election for the issue's proponent.
As NYS Attorney General, I would develop a plan for towns to adopt (possibly including a ready-made corporate structure for immediate use by the town) and urge towns and villages to use this governmental corporate structure as the employer of record for the town's small businesses, for at least the first 3 employees of any business, and possibly for all employees up to 5, 10, 20 or more, to be decided along the way, as the problems are worked out.
Note: my idea is not intended to have the town lend the amount of the weekly payroll for any of the local businesses. Instead, the town should obtain payment in advance, perhaps by immediate, automatic transfers from the bank account of the business into the town's account used for this purpose. Also, the town or the state-created corporation should consider using a payroll service such as PayChex to deal with the town as employer for this purpose, which will be at a much lower cost per employee and payroll check than if the business had to contract itself with PayChex. It might be possible to interest PayChex and other payroll services companies to assist the town or NYS in developing this as a new market for these payroll services.
As an obvious companion idea, the town and village should have a website for local residents to post their resumes and availability for work or to provide consulting services, fulltime or parttime, and for employers to post the availability of work (parttime or fulltime) or need for specified types of consulting services.