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One of the most enviable job perks of working in massage therapy is the flexibility to choose one’s employment status in order to work in a variety of settings.

Depending on a therapist’s goals, working independently might look appealing; for another massage therapist, having a strict schedule and a direct supervisor is better.

Sometimes, though, there is confusion about employment status. Who is an employee? Who is an independent contractor?

The recent announcement of Uber’s $100 million settlement with its workers provides a cautionary tale regarding the ongoing confusion about employment status definition.

 

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The New On-Demand Economy

In the past few years, the on-demand economy has blossomed in the U.S. Uber, Lyft, Airbnb—and massage companies like Zeel, Soothe and Massage Now—have found success deploying workers as their services are demanded by customers.

Recently, both Uber and Lyft were sued by drivers who felt they should have been classified as employees, not independent contractors.

The result? Uber is now paying out $100 million to settle misclassification claims, while Lyft settled with workers for $12.25 million in January.

A Los Angeles Times article noted, “[Lyft] had previously been tripped up because despite classifying its drivers as independent contractors, the lawsuit alleged it exerted the kind of control over its drivers that is normally reserved for employees, such as reserving the right to terminate drivers at will, without warning.”

How a job is done dictates worker classification under the U.S. Department of the Treasury’s Internal Revenue Service (IRS). According to the IRS, if a business owner or payer controls what will be done and how it will be done, then the person doing the work is an employee. If, however, the owner or payer controls or directs only the result of the work, then the worker is an independent contractor.

Massage therapy business owners could be on the hook, too, if workers are not correctly classified. (Business owners should check with a certified public accountant or attorney for more clarification.)

 

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Employment Status Definition

“There are many parallels between on-demand massage companies and ride-sharing companies like Uber,” said Michael Cardman, legal editor with XpertHR, and a specialist in wage, hour and employee compensation issues. “Both business models allow workers to set their own schedules and expect workers to provide their own tools and equipment, factors which weigh in favor of independent contractor status.

“Uber should provide a cautionary tale for on-demand massage companies that classify workers as independent contractors,” he added. “Courts have found that other factors— such as Uber’s right to fire drivers, its strict driver handbook and its monitoring of drivers’ performance—weigh in favor of employee status.”

On-demand massage company Hands of Heart Massage, based in Fort Lauderdale, Florida, for example, classifies all its workers as independent contractors for consistency, said owner Tracy Silber. At any given time, the company has between five to eight therapists working as independent contractors.

As an on-demand business, Silber said it works best for her company model to have independent contractors. Most larger franchises, however, do identify workers as employees.

Yet, the onus is on Silber as a business owner to verify license and insurance, fingerprinting and the comprehensiveness of modalities used by contractors, similar to how employees are screened—which is why it can be tricky to classify properly.

 

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Categorization Matters

Even if you don’t work for an on-demand massage company, when you work for someone, employment status definition, or categorization, matters.

“Careful independent contractor classification must take into account dozens of different factors; there should be no one-size-fits-all classification for massage therapists or any other workers,” said Cardman.

According to the IRS, there are three ways to determine the classification of a worker. Asking these questions may help to ensure compliance when the line may seem blurred, as it often is in the massage industry:

  1. Behavioral. Does the company control or have the right to control what the worker does and how the worker does his or her job?
  1. Financial. Are the business aspects of the worker’s job controlled by the payer? (These include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  1. Type of Relationship. Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If the way a worker’s schedule is set up seems to be very regimented, with stipulations on what tasks a worker must complete and how that worker must complete each, it is likely an employee-employer relationship.

Employers usually withhold income taxes, and withhold and pay Medicare and Social Security taxes. Freedom to go about the day as a worker pleases without structure falls under more of an independent contractor classification. For independent contractors, a business generally is not required to withhold or pay any taxes.

 

Still Confused?

If you’re still not sure if you are an employee or an independent contractor, fill out and submit Form SS-8 and the IRS will make the determination. The worker or business owner can complete the SS-8 Form, but note that it can take up to six months to receive an answer, states the IRS website.

A proper business relationship between massage therapy businesses and their therapists should always involve important legal and taxation choices for both parties—regulation is required at the federal, state and often local levels. Often, business owners and therapists looking to comply with federal and state laws will discover that facts point toward labeling the relationship as employer-employee, not employer and independent contractor.

Yet sometimes, the paperwork is rushed, an employer doesn’t fully understand the laws, and, rarely, a business owner doesn’t want to pay benefits due to an employee and instead classifies one as an independent contractor.

 

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Misclassification Consequences

Most companies want to do right by workers, because getting a visit from the U.S. Department of Labor is the last thing any business owner wants, especially a small business, said Jessica Ginet, human resource assistant at Herb Pharm, in Williams, Oregon.

“Small businesses are audited a lot more often than larger ones,” she said. “It’s important that they are doing this correctly.”

If a worker believes they are not classified correctly, they should immediately let their supervisor know, Ginet said. A correction may be made and an employer may be provided a relief provision if there was a reasonable basis for not classifying a worker as an employee.

Ginet added that it is crucial that workers are classified correctly; otherwise, they could potentially be missing out on benefits earned. While an independent contractor may have more freedom to work, they often forgo extra benefits that employees normally receive.

Contractors don’t usually get health insurance, life insurance, retirement benefits, family and medical leave, or overtime pay. Additionally, contractors must also calculate and pay all withholding taxes.

Unlike a regular workplace employee, if an independent contractor is injured, they do not receive Workers’ Compensation or disability insurance. If they lose a contract, they are also not eligible for unemployment insurance.

Ultimately, much of the administrative and human resources responsibility is placed on the independent contractor’s shoulders, whereas an employee would simply fill out the on-boarding documents and leave the rest to the company’s human resources department.

If things are still fuzzy, the U.S. Small Business Administration is also on hand to counsel workers who have questions about the process. Armed with knowledge, a worker can confidently justify her claims. If a worker still isn’t getting anywhere, contacting the U.S. Department of Labor forces employers to take action and pay back employment taxes if a worker is classified incorrectly, Ginet said.

 

An Ongoing Problem

Unfortunately, misclassifications don’t just hurt the person wrongfully placed; they actually have a domino effect that eventually winds up damaging the U.S. economy.

According to the U.S. Department of Labor’s website, “Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It hurts taxpayers and undermines the economy.”

Because of the ongoing problem of misclassification, The Wage and Hour Division (WHD) is working with the IRS and 29 states to combat the issue while ensuring workers receive the wages, protections and benefits they are entitled to while working, states the U.S. Department of Labor website. The collaboration of several federal agencies to address the problem is showing success, according to the site.

“In Fiscal Year 2015, WHD investigations resulted in more than $74 million in back wages for more than 102,000 workers in industries such as the janitorial, temporary help, food service, day care, hospitality and garment industries through this initiative,” states the U.S. Department of Labor website. “WHD will continue to strive to assure that workers in these industries receive a fair day’s pay for a fair day’s work.”

 

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The Choice is Yours

Whether working as an employee or contractor, the choice is ultimately up to the massage therapist to find a work style and classification that works best. While it may be challenging to learn the classification process, taking extra care to ensure proper designation from the beginning is worth the effort of avoiding unexpected consequences later.

Workers can always depend on resources like the U.S. Department of Labor and U.S. Small Business Administration when switching places of employment to avoid the consequences of misclassification to either the massage therapist or business owner.

 

About the Author

Seraine Page is an award-winning freelance journalist who specializes in lifestyle, wellness and feature stories. She has written for the Kitsap Sun, Bremerton Patriot, Coastal Courier and other publications. She’s the former editor of Liberty Life Magazine. She loves a good massage and sharing her knowledge of well-being with others. She wrote “Olympic Hopeful Counts on Massage” for massagemag.com (March 16, 2016).

 

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