The Importance of Carefully Worded Independent Contractor Agreements

{4:54 minutes to read} In past articles, I have discussed the increasing trend in the courts and government agencies in which the majority of the determinations held that workers classified as independent contractors were, in fact, employees and therefore entitled to minimum wage and all other statutory protections afforded workers.

The New York State Court of Appeals was confronted with this issue on appeal of a decision by the Unemployment Insurance Appeal Board which stated that a yoga studio was responsible for unpaid unemployment contributions for certain yoga instructors whom the studio has classified as independent contractors. The studio in question employed staff instructors, who were employees, and non-staff instructors, who were classified as independent contractors.

The non-staff instructors were permitted to choose their own schedules and choose whether they were paid on the basis of a set rate for each class or a percentage of the fees that were collected from students.

They were:

Paid only if a certain number of students attend their classes;
Not restricted from working at competitor yoga studios;
Free to inform their students at Yoga Vida about the other classes that they taught at those studios; and
Not required to attend meetings or receive training.

The Appellate Division, Third Department had determined the instructors were employees as classes were held at studios, students were solicited by the studio, the studio published class schedules on its website and set the duration of each class. The supervisor would counsel instructors ”regarding their manner of instruction if it posed a risk of injury to the students or if they were otherwise engaged in conduct that he found objectionable.”

The Court found that:

“…despite the existence of evidence that could result in a contrary result, the record contains substantial evidence to support the Board’s decision that Yoga Vida had sufficient control over the instructors’ work, thereby allowing for a finding of an employer-employee relationship.“ ^[1]

That determination was reversed by the Court of Appeals in a decision issued on October 26, 2016. The Court held that the independent contractor classification was proper as non-staff instructors:

“…make their own schedules and choose how they are paid, and unlike staff instructors, who are paid regardless of whether anyone attends a class, the non-staff instructors are paid only if a certain number of students attend their classes. Additionally, in contrast to the staff instructors, who cannot work for competitor studios within certain geographical areas, the studio does not place any restrictions on where the non-staff teachers can teach, and the instructors are free to inform Yoga Vida students of classes they will teach at other locations so the students can follow them to another studio. Furthermore, only staff instructors, as distinct from non-staff instructors, are required to attend meetings or receive training.“ ^[2]

The Court further stated:

“…the proof of incidental control relied upon by the Board, including that Yoga Vida inquired if the instructors had proper licenses, published the master schedule on its website, and provided the space for the classes, does not support the conclusion that the instructors are employees… Furthermore, that Yoga Vida received feedback about the instructors from the students does not support the Board’s conclusion.”

“The requirement that the work be done properly is a condition just as readily required of an independent contractor as of an employee and not conclusive as to either” ^[2]

A takeaway from the Yoga Vida decision is that any business that utilizes independent contractors must ensure that they are free to set their hours, are not subject to supervisory control, are free to work where they choose and are not subject to training. It is also important that these factors are contained in a carefully drafted, comprehensive agreement and that the company’s course of conduct does not deviate from what is contained in the agreement.

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^[1] Matter of Yoga Vida NYC, Inc. (Commissioner of Labor), 119 A.D.3d 1314, 989 N.Y.S.2d 710 (App. Div. 3d Dep’t 2014).

^[2]Matter of NYC (Commissioner of Labor), 28 N.Y.3d 1013, 64 N.E.3d 276, 41 N.Y.S.3d 456, (Court of Appeals N.Y. 2016).