If you are a club owner that currently uses independent contractors to run your personal training and/or group exercise classes, I highly recommend that you Google “Independent Contractor vs. Employee”.
Here are just a few gems from the Small Business Administration’s website to clarify the distinction:
An Independent Contractor:
– Operates under a business name
– Has his/her own employees
– Maintains a separate business checking account
– Advertises his/her business’ services
– Invoices for work completed
– Has more than one client
– Has own tools and sets own hours
– Keeps business records
An Employee:
– Performs duties dictated or controlled by others
– Is given training for work to be done
– Works for only one employer
Now that doesn’t sound too difficult does it? You may even be certain that you are meeting those standards with your group of 1099 Personal trainers. Look deeper and you will find very specific information from the IRS and the Division of Labor Standards Enforcement (DLSE) that might scare the hell out of you. If you don’t believe me try answering these questions —
1) Is the independent contractor performing services that are distinct or different from the gym? Ummm…I don’t think so.
2) Does the independent contractor provide their own supplies, tools and instruments (hint –gym equipment)? Uh…No
3) Does the club owner schedule the trainer’s appointments and instruct them when to show up to meet with their client? Uh… Uh… maybe.
4) Does the club owner get paid directly from the training client or does the trainer handle all of the financial transactions with the clients and then pays the club a percentage or a flat rate for use of the facility? Hmm.
5) Did the independent contractor sign an agreement with club owner that clearly separates the two different businesses? Whoops.
Those are just some of the criteria that the courts look at when determining the independent contractor status of your trainer. The likelihood that a club owner can prove his case with the courts that he or she has clearly established an “independent contractor” relationship with their trainer is remote at best.
If you wrongly classify an individual who behaves as an employee as an independent contract you may have to –reimburse them for wages you should’ve paid them under the Fair Labor Standards Act, including overtime and minimum wage; pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment; pay any misclassified injured employees workers’ compensation benefits. Well, I could go on…in fact, I will. Next month we will talk through the relationship of the personal trainer to your club and how to create the safeguards that will maximize that service.
