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January 12, 2017

New York Employers Should Prepare To Examine Their Independent Contractor Classifications

As we previously advised, on October 27, 2016, the New York City Council passed the “Freelance Isn’t Free Act” establishing protections for independent contractors, including freelance workers.  See our previous alert:  The Act requires written contracts for independent contractors and freelancers that earn at least $800 in a 120 day period for their services.  The Act will take effect on May 15, 2017.

In anticipation of compliance with the Freelance Isn’t Free Act, as well as to comply with other tax and employment laws regarding the proper classification of independent contractors, we advise employers to consider a recent case decided by New York’s highest court.  In Yoga Vida NYC, Inc. v. Commissioner of Labor, decided on October 25, 2016, the Court of Appeals found that a yoga studio had properly classified non-staff instructors as independent contractors.

The Yoga Vida studio employed both staff instructors who were classified as employees, and non-staff instructors who were classified as independent contractors.  The Court of Appeals found that the yoga studio did not exercise enough control over the contract instructors for them to be considered employees.  The Court found significant that the contract instructors:

  1. made their own schedules and chose how they were paid;
  2. were allowed to teach classes at other competing studios and inform Yoga Vida students about the locations and times of these other classes;
  3. were not required to attend meetings or trainings, unlike staff instructors; and
  4. were only paid if a certain number of students attended their classes.

The Court determined that the “incidental control” Yoga Vida had over the contract instructors (such as inquiring if they had proper licenses, providing space for the classes, providing substitutes if an instructor could not teach a class, etc.) was not enough to classify them as full employees.

Takeaway for Employers

Employers in New York State should review their independent contractor relationships and policies and ensure that they are structured and implemented in compliance with applicable law, including the “Freelance Isn’t Free Act” and the Yoga Vida decision.  This may include examining the difference between employees and contractors to avoid misclassification of contractors.  To help clarify the terms of any contractor relationship, and as is required under the Freelance Isn’t Free Act for jobs valued at more than $800, it is further recommended that employers have independent contractors sign agreements that have been vetted by counsel.

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If you have any questions regarding the Yoga Vida decision, the “Freelance Isn’t Free Act”, or the appropriate classification of independent contractors, please do not hesitate to contact us.