After over six years of dispute, the New York Court of Appeals, in In re Yoga Vida NYC, Inc. (Commissioner of Labor), 28 N.Y.3d 1013 (2016), ruled in favor of Yoga Vida NYC, Inc. The court determined that non-staff yoga instructors were not “employees” of the studio, but rather “independent contractors”. The ruling provides clearer guidelines on how fitness studios in New York should treat their instructors in order to maintain the “independent contractor” classification. This could have financial benefits for fitness studios throughout the State of New York.
Yoga Vida is a yoga studio in New York City that offers yoga classes taught by both non-staff instructors and staff instructors. In 2010, the New York Department of Labor ruled that these non-staff instructors were employees, and thus Yoga Vida would be liable for unpaid unemployment contributions. After four different forms of appeals, the New York Court of Appeals ruled in favor of Yoga Vida, stating that the non-staff instructors were not employees.
The Department of Labor and the courts weigh whether there is an employer/employee relationship by looking at the amount of control the employer exercises over the worker. Although different courts have a variety of tests to examine control, the determination rests on the totality of the circumstances. In this case, Yoga Vida’s non-staff instructors could make their own schedule, determine their own payment structure, and never had to attend staff meetings. Additionally, they were free to teach at other studios as well. Conversely, the staff instructors had no choice in payment method and were required to attend staff meetings. With these factors in mind, the court ruled that there was not significant “control” over the non-staff instructors and they thus were deemed independent contractors.
Why Does this Matter?
As the boutique fitness sector grows, and more and more instructional fitness studios pop up in New York, this ruling helpsl provide clarity to owners and instructors. The distinction between the “employee” and “independent contractor” is a costly decision and one that has significant financial ramifications on owners and instructors. If an instructor is deemed to be an “employee”, the gym is required to pay certain fees and taxes, including contributions for unemployment. However, if the instructors are deemed to be “independent contractors”, these fees are not required and the employers are relieved from these obligations.
While this ruling is New York state specific, we have yet to see how this decision may impact these determinations elsewhere.