Earlier this week, the New York State Court of Appeals in Yoga Vida NYC, Inc. v. Commissioner of Labor., No. 130 (N.Y. Oct. 25, 2016), issued a rare decision concerning an unemployment determination, reversing the Appellate Division and concluding that the employer yoga studio did not exercise sufficient control over certain of its instructors to create an employment relationship.

Yoga Vida, a yoga studio in Manhattan, offers classes taught by both staff instructors, classified as employees, and non-staff instructors, classified as independent contractors.  The State’s Unemployment Insurance Appeal Board held that the non-staff instructors were misclassified as independent contractors, rendering Yoga Vida liable for additional unemployment contributions.  Yoga Vida appealed to the Appellate Division, which affirmed the determination of the UIAB.  The Court of Appeals reversed, finding that the non-staff instructors were not employees because Yoga Vida did not exercise sufficient control “over the results produced and the means used to achieve the results.”

In support of its conclusion, the Court found that:

  • The instructors made their own schedules and chose how they were paid (either hourly or on a percentage basis);
  • Unlike other instructors, who were paid regardless of whether anyone attended a class, the instructors at issue were paid only if a certain number of students attend their classes;
  • The studio did not place any restrictions on the instructors’ ability to teach for other studios; and
  • The instructors were not required to attend staff meetings or receive training.

The Court further held the “incidental control” Yoga Vida did exercise–such as determining if the instructors had proper licenses; publishing a master schedule on its web site; providing space  for the classes; and providing a substitute instructor if the non-staff instructor was unable to teach a class and could not find a substitute–did not warrant a finding of employee status.  The Court likewise did not view as dispositive that Yoga Vida generally determined the fee it charged to students and collected it directly from the students.  Finally, the Court held that students providing feedback on the non-staff instructors did not render the instructors employees, as “[t]he 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.”

Although this decision is encouraging for companies that engage independent contractors, it is important to remember that this determination, like all employment classification inquiries, is highly fact-dependent.  Businesses should conduct a self-assessment of their independent contractor models–ideally with under the supervision of counsel and subject to privilege–to determine the risk of a classification challenge from their independent contractors or government agencies.

 

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Photo of Allan Bloom Allan Bloom

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages…

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York TimesReutersBloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved hundreds of millions of dollars in potential damages.

Allan is regularly called on to advise boards of directors and senior leadership on highly sensitive matters such as executive transitions, internal investigations and strategic workforce planning. He also has particular expertise in the financial services industry, where he has litigated and arbitrated cases, including at FINRA and its predecessors, for more than 20 years.
A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA, Senior Editor), Employment Discrimination Law (ABA/Bloomberg BNA, Final Proof Editor), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR, Editor), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE, Chapter Author).

Allan is a member of the NYSBA’s House of Delegates, sits on the Executive Committee of the NYSBA’s Labor and Employment Law Section, and is a Fellow of the College of Labor and Employment Lawyers. He has been recognized as a leading practitioner by Chambers since 2011.

Photo of Guy Brenner Guy Brenner

Guy Brenner is a partner in the Labor & Employment Law Department and leads the Firm’s Washington, D.C. Labor & Employment practice. He is head of the Government Contractor Compliance Group, co-head of the Counseling, Training & Pay Equity Group and a member…

Guy Brenner is a partner in the Labor & Employment Law Department and leads the Firm’s Washington, D.C. Labor & Employment practice. He is head of the Government Contractor Compliance Group, co-head of the Counseling, Training & Pay Equity Group and a member of the Restrictive Covenants, Trade Secrets & Unfair Competition Group. He has extensive experience representing employers in both single-plaintiff and class action matters, as well as in arbitration proceedings. He also regularly assists federal government contractors with the many special employment-related compliance challenges they face.

Guy represents employers in all aspects of employment and labor litigation and counseling, with an emphasis on non-compete and trade secrets issues, medical and disability leave matters, employee/independent contractor classification issues, and the investigation and litigation of whistleblower claims. He assists employers in negotiating and drafting executive agreements and employee mobility agreements, including non-competition, non-solicit and non-disclosure agreements, and also conducts and supervises internal investigations. He also regularly advises clients on pay equity matters, including privileged pay equity analyses.

Guy advises federal government contractors and subcontractors all aspects of Office of Federal Contract Compliance Programs (OFCCP) regulations and requirements, including preparing affirmative action plans, responding to desk audits, and managing on-site audits.

Guy is a former clerk to Judge Colleen Kollar-Kotelly of the US District Court of the District of Columbia.