Compliance Review: Home Inspectors Performing WDO Inspections in the Pest Control Industry

October 6, 2008

The following report has been generated from a variety of records, observations and inspections, and interviews of current and former pest control identification cardholders that worked for licensed pest control companies as part-time wood-destroying organism inspectors.  The Bureau of Entomology and Pest Control utilized a novel procedure referred to as a Compliance Review to conduct investigative activities under the authority of Chapter 482, Florida Statutes and the Department’s Rules, Chapter 5E-14, Florida Administrative Code.   This report contains an in depth accounting of the findings from the three companies reviewed.  The report contains information, which discusses in general terms the process used to obtain information from licensees, certified operators and identification cardholders (licensee employees); a summary of findings with special emphasis on ID cardholder training, supervision and the employee-employer relationship.  The report also contains a tabulated listing of infractions specific to Chapter 482, FS or 5E-14, FAC.  This report is available upon request through the Bureau of Entomology and Pest Control or by contacting Mr. Michael Page at 850.921.4177 or pagem@doacs.state.fl.us.

Compliance Review Process: General

During Fiscal 2004-2005, several inspections conducted by Department personnel identified a “business model” used by a number of pest control licensees that employed individuals in occupations outside of, but related to pest control to perform work pursuant to Chapter 482, FS and the Department’s Rules.  This business model did not appear to conform to requirements delineated in Chapter 482, FS, with respect to part-time employee training, supervision and an apparent level of employee independence from the licensee.  Individuals working in other occupations were hired to work as part-time employees of a licensed pest control company, they were provided a pest control identification card (ID card) to perform pest control work, and performed limited forms of pest control or pest control inspections simultaneous with their primary occupational functions.  Those occupations most often recruited for work in pest control include occupations such as landscapers and home inspectors.  The primary question related to the use of this business model concerns independent contracting.  Chapter 482, FS has no provision allowing the use of an independent contractor in the pest control industry therefore, if it was determined that individuals in another occupation who possessed a pest control ID card were operating as such, this would present an out of compliance situation under the Structural Pest Control Law.

Initially, Department efforts to interview ID cardholders of a licensee proved difficult due to what appeared to be a misunderstanding concerning a credential holder’s responsibility to cooperate with inspections conducted pursuant to Chapter 482, FS.  This misunderstanding was apparent on the part of both company licensees and their employees.

The Department utilized a Compliance Review (CR) to evaluate and assess the level of company compliance with Florida Statutes and the Department’s Rules in the category of Termite and Other Wood-Destroying Organism’s Pest Control.  For this process to work effectively two conditions were required: a company under review agreed to have its employees submit to interviews without interference; and the licensee must willingly open all company records for Department review.  To garner support for a licensee’s cooperation, the Department agreed to take no administrative actions against the licensee or any of its employees during the course of the review period.  If violations of Chapter 482, FS, or the Department’s Rules were found as part of the CR, a licensee and/or Certified Operator in Charge (COIC) would be provided a specified period of time to come into compliance.  The Department would conduct subsequent follow up inspections to ensure that company management had implemented corrective measures.  A company found in violation after the corrective period may be subject to administrative actions if warranted.

There were three goals in the utilization of a CR process: Gain cooperation with licensee, COIC and company employees; Improve our understanding of the business model used by a company; Ascertain whether or not the licensee and/or the employees are operating in compliance with Ch 482, FS and Ch 5E-14, FAC.  This CR process specifically evaluated company business practices to ascertain if employees of the licensed pest control company were operating as independent contractors.  The major areas of inquiry included:  Employee Training; Employee Supervision (Chapter 482.091, FS); and Employee Independence from the licensee in accordance with the definition of “employee” (Chapter 482.021(7), FS) and “independent contractor” (Chapter 482.021(12), FS).

Compliance Review Findings: Company Comparison

Three different companies underwent Compliance Reviews.  The number of employees in each company ranged from six to 55 employees as of the writing of this report.  All companies reviewed stated that they had an employee training program and that employees were supervised by the company’s Certified Operator in Charge (COIC).  Supervision of company ID cardholders appeared to be varied, ranging from direct supervision, for employees that worked out of a licensee’s business location, to periodic contact by phone or personal visits by the COIC.  Licensees did not issue employees vehicles, but required them to utilize their personal vehicles.  The licensee compensated ID cardholders for the use of their vehicle by providing a vehicle allowance to their employees.  With few exceptions, ID cardholders worked for or owned a home inspection company.  Lastly, employees of the licensee did not work out of a centralized office, but were located in a number of different geographic regions (cities) throughout the state, many employees worked several hours drive from the licensee.

Overview of the “Business Model”

In late 2004, the Department began to receive complaints from several licensed pest control operators that a small number of licensed pest control companies might have been operating out of compliance with Chapter 482, FS, using a non-conventional business model.  Specifically, that the licensee’s of these companies were “selling ID cards” to individuals who’s primary occupation was in a related industry, the home inspection industry.  The term “selling ID cards” in the pest control industry connotes a situation whereby an individual hired by a licensee is provided a pest control ID card to perform pest control.   The implication here is that the individual (employee) provided an ID card was not actually acting in the true sense of an employee of a pest control company.  The definition of “employee” found in section 482.021(7), FS, requires that an individual be an employee of the licensee and that the licensee provide that employee with necessary training, personal supervision by the licensee’s Certified Operator in Charge, pesticides, equipment, insurance and compensation (most likely in the form of a salary or commission).   The Department also obtained information that company employees were not provided with necessary training or supervision giving credence to the claim that licensees were providing ID cards to independent contractors.  Section 482.021(12), FS, defines “independent contractor” as an entity separate from the licensee that receives remuneration for pest control work and deposits it in a bank account other than the licensees; owns or supplies its own vehicle, equipment and pesticides; maintains a business operation, office or support staff independent of the licensee’s direct control; pays its own operating expenses; or pays it’s own workers compensation insurance.

Preliminary inspections identified several consistent features of the business model:

• The licensee’s employees technically met the definition of “employee” (they held ID cards, had met minimum training requirements, were supervised “by phone” but, conducted their daily activities autonomously from the licensee, behaving as “independent contractors”)
• Employees represented themselves as home inspectors who could perform WDO inspections
• The licensees established the cost of an inspection (in some cases as low as $25/inspection) but, the home inspector often charged an additional fee that was an average of 3 to 4 times greater than that set by the licensee for the cost of the WDO inspection
• The licensee’s employees worked independently from the licensee and appeared to lack proper training and supervision
• The licensees operated out of a single business location; having only one Certified Operator in Charge (COIC); recruited and hired home inspectors at meetings and conventions sponsored by home/building inspection associations throughout the state
• Licensees took advantage of the fact that there is no statutory limit on number of employees supervised by COIC or geographic location where they may live and work in order to expand their business statewide

NOTE: Because of the relationship to the licensee, I will utilize, interchangeably, the term “employee”, “ID cardholder”, and “home inspector”, to indicate a single entity, the licensee’s employee throughout this report from here forward.

Compliance Review Findings: Employee Training

Two of the three companies participating in the CR process appeared to have a comprehensive training program indicating that they provided at least 5 days of field training to their ID cardholders as is required in Chapter 482.091(3), FS.  The Department noted that the 5-day initial training requirement occurred over an average of a 30-day period.  Two of the companies reviewed instituted additional requirements for employment that included having completed a minimum of 250 home inspections and 2 years experience in the home inspection business.  Requirements for home inspectors have no relationship to the performance of Wood-Destroying Organisms Inspections (WDOI) and are not a requirement of Chapter 482, FS.

Statements provided by many ID cardholders’ contradicted the statements made by licensees when asked about their level of training.  A small number of ID cardholders interviewed indicated that they had only a few hours of training and these individuals openly stated the desire for additional training to enhance their confidence in performing WDOI.  ID cardholders also indicated that completing the WDO Report Form, DACS 13645, was heavily emphasized over insect biology, behavior and identification, and the state laws governing WDOI.  Chapter 482.091(9)(a-c), FS, delineates these specific training requirements for WDO inspectors.

To ascertain the level of training Department Inspectors questioned a few ID cardholders to ascertain if they could describe the differences in the biology, behavior and identification of different species of termites.  When questioned, those ID cardholders were unable to describe adequately differences between drywood termites and subterranean termites; two species of termites commonly found infesting structures in Florida.

The Department Inspectors also noted differences in statements from former ID cardholders and those ID cardholders still employed by those companies reviewed.  Specifically, those former ID cardholders interviewed stated that they did not receive what they considered adequate training to identify WDOs and, as a result, had little confidence in their ability to perform WDOIs adequately.  In one instance, Department Inspectors documented that a former employee was asked to sign off as having received training when no training was actually provided.

Compliance Review Findings: Employee Supervision

Licensees indicated that they were in contact with their employees on a regular basis.   Licensees indicated that “contact” meant by phone or in person and that, contact with their ID cardholders was approximately, “weekly to monthly”.  These statements appear to contradict ID cardholder accounts of supervisory contact in that many ID cardholders indicated supervision was periodic, “monthly or longer”.  Employees actually working out of the licensee’s location provided the only exception to periodic supervision.  It was difficult for the Department to ascertain the actual level of employee supervision since many of the ID cardholders worked in locations or cities far from the licensed location.  Although there is no limit on the geographical distance an ID cardholder can work from the licensed location, supervision of ID cardholders is required in Chapter 482, FS.  Employees must “work under the direction and supervision of the licensee’s certified operator in charge” as required in section 482.091(2)(a), FS, and a COIC shall have as “her or his principal duty … the responsibility for the personal supervision of” a company’s employees as required in section 482.152, FS.

Two additional comments regarding supervision and the status of ID cardholders as part-time employee’s warrants mention here.  Licensees of all three companies reviewed indicated that their employees worked only part-time, typically only when a consumer requested a WDOI.   It is conceivable that an ID cardholder may only perform a WDOI once a week (or less) and that periodic supervision is adequate under these circumstances.  In addition, it warrants mention that the responsibilities of the COIC are greatly reduced in this business model since four out of the six duties specified in section 482.152, FS, pertain to pesticides.

Compliance Review Findings: Employee Independence from the Licensee

The key factor in deciding if an employee is acting as an independent contractor is delineated in section 482.021(12) when it states that an independent contractor means, “…an entity separate from the licensee…”.  That is, what level of independence can be attributed to a licensee’s employees in the normal conduct of their employment?  The Department evaluated three business functions in order to assess whether an ID cardholder was operating independent from a licensee.  The three functions included Advertising by an ID cardholder; how an ID cardholder Received Assignments for WDOI; and how an ID cardholder/company Invoiced for Services.

Advertising by ID Cardholders:

Licensees indicated that their business was supported primarily by “word of mouth” and that the company did no advertising.  They also indicated that employees did not advertise WDOI and that they specifically instructed their ID cardholders not to advertise for WDOI.  ID cardholders also indicated that they did not advertise for WDOI.  However, of those ID cardholders interviewed, the majority utilized various means to advertise their services.  Since the majority of ID cardholders owned or worked for home inspection companies, advertisements for WDOI were often listed among the number of home inspection services they offered a consumer.  Typically, the ID cardholder would indicate that they could “arrange for” a WDOI or simply indicate “Termite” or “WDO” on various advertising vehicles such as brochures, business cards, newspaper ads, Internet websites, and in at least one case, radio to advertise their home inspection services.

In all of the examples of advertising by home inspectors, there appeared to be only brief mention of their association with a licensed pest control company, if at all.  Whether this is by design or by simple coincidence, it appears to be an attempt to obfuscate the fact that a pest control company is actually performing the WDOI.  For example, a number of website ads by home inspection companies stated, “All WDOI performed by _____”, and listed the common business name of the licensee (in the blank space).  This is problematic because in two of the three companies reviewed the common business name of the company is an abbreviation of the company’s actually licensed name that includes only two alphanumeric characters (i.e., AB or C-1).  Alerting a consumer that “AB” performs all WDOI is meaningless, because there is no intuitive means by which a consumer can conclude that “AB” is actually a licensed pest control company.  This leads the consumer to infer that the home inspection business can actually perform the WDOI.

The Department also noted that former employees of the licensee admitted that the primary means of obtaining requests for WDOI was through their home inspection businesses.  A prospective customer calling to request a home inspection would be asked by the company’s receptionist (or home inspector) if they wanted to include a WDOI as part of a home inspection.  It was also customary for a home inspector to inform a homeowner that they could perform a WDOI while they were on site and often solicited pest control (WDOI) business as part of the home inspection.

It is common practice for an ID cardholder to be authorized by a licensee to solicit and advertise the licensee’s services (cold calling) whenever an opportunity presents itself.  And, a part-time ID cardholder is not usually required to specify exactly the time that he will be performing pest control.  Therefore, whenever an employee solicits or advertises the performance of a WDOI, in the conventional sense, he is likely doing so on behalf of the licensee.  However, in this business model the home inspector possessing an ID card has a personal interest in soliciting and advertising a WDOI, especially when you consider that the home inspector is charging between 3 and 4 times what the licensee has determined as the cost of a WDOI as his “service fee”.  In a conventionally managed pest control company the ID cardholder does not charge an additional fee for the work he performs for the licensee nor does the ID cardholder of a conventional licensee stand to gain monetarily in the same way as the home inspector.

Only the licensee can advertise and solicit the performance of pest control in accordance with section 482.021(21)(e), FS and section 482.091(2)(a), FS.  In each of the above instances; that is, advertising through various media and soliciting business, the ID cardholder has a vested interest in promoting the licensee’s business, and the home inspector is operating as an independent contractor.   Chapter 482.091(2)(a), FS, requires that “An identification cardholder shall operate only out of, and for customers assigned from, the licensee’s licensed business location.”  By soliciting pest control business, the performance of a WDOI, as part of a home inspection the home inspector has committed a violation of these Florida Statutes.

Assignments to ID Cardholders:

Licensees indicated that all WDOI work assignments emanated from their licensed location.  ID cardholders indicated that they received assignments from the licensee by phone, email or facsimile transmission.  Interestingly, when Department Inspectors inquired about receiving assignments from their employers, former employees admitted that the primary means of obtaining requests for WDOI was through their home inspection business via a realtor and/or a title company.

Notwithstanding the apparent contradiction between statements made by business licensees and their current and former employees, all of the statements made above are essentially “true” statements.  The statements in the paragraph above appear to be contradictory because section 482.091(2)(a), FS, states that “An identification cardholder shall operate only out of, and for customers assigned from, the license’s licensed business location.”  In order for an ID cardholder to receive an “assignment” for a WDOI the consumer would have to contact the licensee and “request” the work be done.  Yet, former employees stated that they received a majority of their WDOI requests from their home inspection business.  It is important to analyze carefully the procedure used to assign work to an employee and how the licensee receives requests for work and assignments are made in this business model because it sets up a confounding relationship between the licensee and his employees.

What became apparent after more probative discussions with licensees and their employees, and a review of WDOI reports, was the fact that the home inspector was acting on behalf of the consumer, as an agent.  At first glance, this did not appear to be problematic since it is common practice for realtors and lending institutions to request a WDOI from a pest control licensee.  However, it is important to remember that the home inspector and the ID cardholder are the same person.  The confounding issue here appears to be an ethical one.  That is, the home inspector, who also holds an ID card with a licensee and is his employee, is attempting to represent the consumer, the licensee and himself (since he will also gain monetarily from the work) simultaneously.

The procedure delineated below outlines a typical scenario relating to how work assignments are given to employees.  It is important to remember the interrelated nature between the licensee and the employee who is acting on his or her behalf as a home inspector and employee of the licensee.  It is important to remember that the home inspector and the ID card holder are the same person and will be represented as “home inspector/ID cardholder” in the following discussion.

1. The Consumer (or his/her agent) contacts a home inspector to request a home inspection
2. Home inspector/ID cardholder asks consumer if they want a WDOI (either when home inspection is requested or during the home inspection)
3. The home inspector/ID cardholder acts as the consumers agent and “requests” the WDOI from his employer, the licensed pest control company he/she is employed with
4. The licensee assigns WDOI to the home inspector/ID cardholder by phone, email or Fax

The above scenario identifies problems with the licensee’s business model in that their employees are at some point, operating separately and independently from them.  When the home inspector acts as the requestor of the WDOI (as an agent), and then subsequently performs the work, they are likely acting on their own behalf.  Although the licensee also gains from the services provided to the consumer, this scenario (business model) provides the home inspector/ID cardholder a sufficiently self-supporting existence, separate and independent from the licensee.

It is common practice for a realtor, loan agent, or a title company to act on behalf of a consumer who is in the process of a real estate transaction and request a WDOI if it is required prior to the sale or purchase of a home.  It is also conceivable that a home inspection company could act as an agent requesting a WDOI for a client.  However, in the example scenario described above there appears to be a clear conflict of interest.  A realtor, loan agent or someone working for a title company could not act on behalf of a consumer by requesting a WDOI and then subsequently performing that inspection because of the financial interest each has in the sale of the property.  It is therefore, unethical.  The ethical standards set by these professions forbid such conflicts of interest.  Similarly, the home inspector who solicits work, requests said work as an agent, and then performs the work solicited and requested has entered the realm of an ethical conflict of interest.

One final note of interest concerns company policy in at least two of the companies reviewed which required ID cardholders to perform a predetermined number of WDOI to remain employed with the company.  If an ID cardholder could not meet the agreed upon goal of inspections they may be terminated from the pest control company.

Invoicing for WDOI:

Prior to the discussion on invoicing consumers, it is necessary to understand the arrangement made between the licensee and their employees who are performing WDOI.  In each company reviewed, licensees established a fee for the cost of a WDOI.  The average fee assessed to the employee was approximately $25/inspection.   This fee was to be remitted to the licensee for each WDOI the home inspector performed.  The licensee informed the employee (home inspector/ID cardholder) that they were free to add an additional fee when they performed the WDOI.   The Department noted that this “service fee” could range between $50 and $100/inspection (making the total cost for a WDOI between $75 and $125).   The licensee is essentially “renting” (or “selling”) an ID card because the employee is allowed to establish an additional cost for the WDOI thereby benefitting both the employee and the licensee.   Since there is an established fee for each inspection, a licensee can predetermine the productivity of an employee.  The employee needs the ID card to legitimately conduct WDOI and improve his bottom line.

Arguably, it is the employee setting the price of the WDOI, not the licensee.  The Department was not able to ascertain if consumers are made aware of the true cost of a WDOI set by the licensee ($25/inspection), but empirical evidence suggests that the cost of a WDOI represented to a consumer is essentially the one determined by the home inspector/ID cardholder.  In addition, it was learned that for income tax purposes the licensee provides a small percentage or commission fee to the ID cardholder as a “salary”.  This is an apparent attempt to avert a violation of section 482.021(7), FS, which requires a licensee to pay employee compensation.   In one of the companies reviewed that percentage was 1% of the cost of a WDOI established by the licensee.  That amounts to $0.25/per inspection performed by an ID cardholder.  It is conceivable then that if a home inspector performed 40 WDOI in a year that his salary would amount to only $10.00 for the year and the licensee would provide a W-2 reflecting this amount as a salary paid for the year. This provides another example of an employee’s independence from the licensee because the licensee is not actually paying the employee a salary or commission for the performance of a WDOI.  Instead, the ID cardholder is left to determine what they want to charge for the WDOI services they provide a consumer.

Identifying a pattern for billing a WDOI was difficult because there was no consistent pattern observed for the billing of services by the three companies reviewed.  The Department noted that services for both a home inspection and a WDOI services were often bundled together, further complicating billing practices.  It is entirely appropriate for an ID cardholder to performed a WDOI and accept remuneration for the work as long as the employee gives the money directly to the licensee.  The same is true for a home inspector who bundles services and requires two checks, one for his services and one for the WDOI as long as the money for the WDOI is paid directly to the licensee. However, many of the ID cardholders deposited checks for the performance of bundled services into their home inspection business accounts and remitted the fee ($25) charged by the licensee for the service keeping the balance of service fees in their personal account.  This provides a basis for the argument that the licensee is “renting” the ID card to the employee (see discussion in the preceding paragraph).  There appeared to be several ways invoicing occurred:

• A consumer is billed directly by the pest control company.
• The home inspector/ID cardholder billed a consumer and required two checks be written: one check for the home inspection and a separate check for the WDOI which was made out to the licensee.
• The home inspector/ID cardholder billed a consumer for both the home inspection and WDOI and a single check was made out to the home inspection company, the funds deposited, and the fee for the WDOI was remitted to the licensee.

The first two examples indicate that the money charged by the licensee was paid directly by the consumer for the WDOI.  These two scenarios indicate compliance with the requirements in Chapter 482, FS.  The Department found that the third example was the predominant means of payment for the performance of a WDOI.  That is, most home inspectors/ID cardholders accept one check from the consumer and deposit the money into the home inspection company’s bank account.  This is a direct violation of section 482.021(12)(a), FS, in that it provides evidence that the employee is acting as an independent contractor.

General Summary and Conclusion of Findings:

The table above lists violations of two sections of Chapter 482, FS.  These sections include 482.021, FS, the Chapter’s definitions and 482.091, FS, the section outlining requirements for identification cardholders.  Violations noted included the licensees, COICs and identification cardholders.  Taken as a whole, this set of infractions indicates several non-compliant situations inherent with the business model employed by these licensees.  Therefore, the violations documented in this report indicate that the employees (home inspectors) working within the business model delineated in this report are operating separately from or independently from the pest control business licensee.

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Formosans and the floodwalls!

Three years after Hurricane Katrina devastated New Orleans, people still speculate over causes of the destruction of the city’s floodwall system. A new article in the fall issue of American Entomologist (Vol. 54, No. 3) suggests that Formosan subterranean termites played a large role.

Author Gregg Henderson, a professor at the Louisiana State University AgCenter, discovered Formosan subterranean termites (Coptotermes formosanus Shiraki) in the floodwall seams in August, 2000 – five years before Katrina struck – and noticed that the seams were made of waste residue from processed sugarcane. Known as bagasse, this waste residue is attractive to Formosan termites.

After the dikes were breached in 2005, Henderson and his colleague Alan Morgan inspected 100 seams for evidence of termites, including three areas where major breaks in the walls had occurred. 70% of the seams in the London Avenue Canal, which experienced two major breaks during Katrina, showed evidence of insect attack, as did 27% of seams inspected in the walls of the 17th Street Canal.

The Formosan subterranean termite originates from China, where it has been known to damage levees since the 1950s. Besides eating at bagasse seams, the termites may have contributed to the destruction of the levees of New Orleans by digging networks of tunnels, which can cause “piping,” sending water through the tunnels and undermining the levee system.

“I believe that the termites pose a continuing danger that requires immediate attention,” Henderson writes. “The fact that termites cause piping in levees must be accepted.”

The author further suggests that New Orleans’ 350 miles of levees and floodwalls should be surveyed for termite damage, and that treatment of the floodwalls and nearby trees may be necessary to avoid future disasters. Call today for your free inspection and we’ll design and implement a pest plan for you.

How to prevent The Pest Detective from giving you some bad news!

(Excerpt from Paul Hardy from Pest Management Professional)

Many “Baby Boomer” homes (built since 1946) on crawlspace foundations in the Southeastern United States suffer from poor moisture management as a part of the original construction. Since then, energy-savings techniques, keeping the homes more airtight, have compounded the problem. Common symptoms of crawlspace moisture problems include:

Mold, mildew, fungus and/or moisture damage in the crawlspace or living areas of the structure not caused by running water.

• Musty odors noticed in the crawlspace and living areas
• Condensation (“sweating” or water forming)
• Buckled hardwood floors caused by the flooring taking on moisture and expanding.
• High humidity in the living area.
• Rot in wooden framing members.
• Insect infestations, including powerpost beetles, wood borers, carpenter ants and/or termites.

What causes humidity and condensation in crawlspaces?

• Days when the humidity is high, the wood inside the crawlspace sucks it up like a sponge.
• Rain water seeps in after the ground becomes saturated.
• Cold water pipes and ductwork cause condensate.
• Cross ventilation helps, but only if the air outside is dry.
• Ground barriers help, but only if the ground is completely covered.
• Borates kill wood-decay fungi, but they do not stop the wood from absorbing the moisture.

Since the early 1980s, houses are being built tighter — in response to the energy commissions recommendations based on researchers, engineers and home building experts.  So the solution, in our humbled opinion, is that crawlspace encapsulation is a result proven program that controls temperature, humidity and reducing condensation that is acceptable.  Contact us at 904.720.0404 if you wish to receive more information on preventing future damage and a free inspection.