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.