On Sept. 18, California Gov. Gavin Newsom signed California Assembly Bill 5 (AB 5), which codifies a controversial outcome of an April 30, 2018, decision by the Supreme Court of California; AB 5 cements the new standards by which businesses may classify workers as independent contractors.
AB 5 takes effect Jan. 1, 2020 — and has the potential to affect massage therapists and massage therapy businesses across the state.
As the Los Angeles Times reported last year, the standards, called the ABC Test, were born from a Supreme Court decision that came about due to a class-action lawsuit against Dynamex Operations West Inc., a company that employs drivers to deliver packages and documents; those drivers had been classified as independent contractors rather than employees.
The Supreme Court’s decision, and now AB 5, refines the definition of which workers may be considered independent contractors in California.
What Does This Mean for Massage Therapists?
How AB 5 might affect licensed massage therapists isn’t determined yet, as massage therapy is not specifically mentioned as an exempt profession in the bill. However, many professions will be exempt, including some health care occupations.
The bill states that “exempt occupations would include, among others, licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and others performing work under a contract for professional services, with another business entity, or pursuant to a subcontract in the construction industry.”
What About Massage App Companies?
It will take some time to see how the bill’s provisions are implemented, and how the bill might affect services that offer apps through which to book independent massage therapists.
Some, such as Soothe and Zeel, get involved in setting appointment times and choosing therapists to send, and require interviews and other vetting before they can start seeing clients. While the therapist remains an independent contractor, the level of control the companies have may be problematic when it comes to those contractors being able to pass the ABC Test. (Soothe declined to comment at this time, and Zeel did not respond to MASSAGE Magazine’s request for comment.)
MASSAGE Magazine looked in some depth into how several massage-app companies typically operate; read “Mobile Massage Apps: The Complete Guide for Therapists,” for more information.
Other massage therapy apps, such as Matago, are online marketplaces aimed at matching independent massage therapists with clients, without overseeing the actual details of the transaction; it remains to be seen how such companies will be affected by AB 5 and legislation like it. (Matago has not yet expanded into California, said founder Christopher Merrell.)
Take the ABC Test: Are You an Independent Contractor in California?
As of Jan. 1, a worker can be considered an independent contractor only if all of the following statements are true; these are quoted from the official Supreme Court opinion in the Dynamex lawsuit and referred to as the ABC Test:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
Statement “B” above has the most potential to cause issues for any company that uses contract labor.
For example, if you are a massage therapist performing massage therapy for a company that provides massage therapy, your work falls within the “usual course” of the company’s business. “B” in the ABC Test does not apply to you, and you cannot be treated as an independent contractor.
Many massage therapists work as independent contractors, and in light of this ruling and subsequent bill, many will continue to do so; status changes may soon be required if you work for a company that classifies and treats you as an independent contractor rather than an employee and your situation does not pass the ABC Test.
The ABC Test, which has been used in Massachusetts since 2004, replaces the previous set of criteria, named the Borello Test after the California Supreme Court case for which it was created.
If your profession is in a category exempt from the ABC Test, says AB 5, the Borello Test will apply instead of the ABC Test.
Independent Contractors vs. Employees
In general, if you’re an independent contractor, you are truly independent: You control the means, price and terms of your work. For example, you decide what you wear, what equipment you use, which clients you work with, how much you charge, and where and when your sessions will take place.
You collect 100% of your fees and are then responsible for paying taxes on that income, as well as reinvesting money into your business for things like supplies and marketing. You typically pay for your own health care coverage and do not receive any benefits from the company that pays you.
In contrast, employees have most of these decisions made for them by an employer. When you are an employee, your employer dictates your schedule, what modalities you may offer, the price per session, and most other details. (In California, due to a 2016 court decision, your employer is also required to pay you for “non-productive time,” in which you are at work but do not have a client session.)
Employees receive a portion of each session fee plus tips, and taxes will be withheld from your check automatically; you may also be eligible for health insurance, vacation and sick time, and other benefits. Many of the costs of doing business, such as equipment and marketing, will likely be borne by the employer.
Employees are also entitled to certain protections under the law, including those surrounding minimum wage, mandated break times, anti-discrimination, privacy, means of dispute arbitration and others.
Whether a massage therapist works as an independent contractor or as an employee, they are responsible for carrying their own liability insurance policy that covers many modalities and protects them in case of client accident or injury.
With the rise of mobile massage and on-site massage business models, the line between independent contractors and employees often becomes blurred.
For example, workers for a typical massage app company are treated as independent contractors — they use their own equipment; determine their own schedules; and are paid directly, left responsible for their own income taxes.
However, some aspects of their work are more akin to those of employees. The company, for example, sets the session fee and takes a portion of it, may limit you to certain modalities or techniques, or require a certain type of uniform. It also handles booking and marketing, which can be major expenses for a solo therapist.
“In recent years … employers have been treating workers as independent contractors even when the employer controls multiple aspects of where, when and how work is done,” said Joseph Slater, a professor and labor law expert at The University of Toledo College of Law. “Bill 5 makes it clear that if an employer does control how, where and when work is done, that work is a normal part of the employer’s business, and the worker is doing at least most of his or her work for that employer, the worker is an employee, not an independent contractor.”
Depending on how AB 5 is implemented and enforced, many massage businesses may have to make changes in the way they operate. There could also be changes to the legislation itself if certain groups challenge the law.
“I think … there’s going to probably have to be some litigation or clarification with the legislature in order to work this out with massage therapists,” said Mike Arias, a Los Angeles attorney familiar with this legislation, “because of the fact that they’re one distinct group; they’re licensed.”
While the bill is geared toward protecting workers, many massage therapists and business owners have concerns about its implications.
After the initial ruling in April of last year, Amy Jean Belk, a certified massage therapist, licensed esthetician, and owner of Serenity Wellness Spa in Rancho Cucamonga, told MASSAGE Magazine she would be following news about the ruling, as well as consulting with her tax preparer and attorney about any changes that will be required.
Like many massage therapists, Belk was concerned that making companies give more of their workers employee status may drive up the price of massage while driving hourly wages down, since businesses will have to find ways to cut costs and absorb the additional expenses associated with employees.
Belk also noted that, despite the protections employee status may offer, many therapists actually prefer working as independent contractors.
“A lot of massage therapists went into this industry because they wanted the freedom to make their own schedule,” Belk said.
Money-wise, she added, therapists may not benefit from having their positions reclassified, citing herself as an example: She once worked as an employee for a physical therapist, but was happier after she and the employer agreed to change her status to that of an independent contractor; she said she took home more money and was able to write off more business expenses on her taxes.
AB 5 goes into effect on Jan. 1, 2020; MASSAGE Magazine will report on any new developments.
About the Author
Allison M. Payne is the associate editor of MASSAGE Magazine and Chiropractic Economics. She has written many articles for MASSAGE Magazine and massagemag.com, including “Massage Franchises Respond to Misconduct Allegations with New Safety Policies” and “The Massage Therapist’s Guide to Reiki.”