An April 30 decision by the Supreme Court of California has changed the standards by which businesses may classify workers as independent contractors.
And this ruling has the potential to affect massage therapists and massage therapy businesses across the state.
As the Los Angeles Times reported, the decision 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 refines the definition of which workers may be considered independent contractors in California. This ruling will help the lower courts make a decision in the Dynamex lawsuit.
Take the ABC Test: Are You an Independent Contractor in California?
According to the April 30 ruling, a worker can only be considered an independent contractor if all of the following statements are true; these are quoted from the official Supreme Court opinion 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, and “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, many will continue to do so; status changes may eventually 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.
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 percent 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 healthcare 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 massage-on-demand business models, the line between independent contractors and employees often becomes blurred.
For example, workers for a typical massage-on-demand 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.
Depending on how the April 30 ruling is implemented and enforced, many massage businesses may have to make changes in the way they operate. (A spokesperson for Soothe, a major massage-on-demand company based in California and that works with independent contractors in California, said he needed to decline to comment at this time. Zeel, also a massage-on-demand company doing business in California, did not respond to a request for a comment.)
While the ruling is geared toward protecting workers, many massage therapists and business owners have concerns about its implications.
Amy Jean Belk, a certified massage therapist, licensed esthetician, and owner of Serenity Wellness Spa in Rancho Cucamonga, told MASSAGE Magazine she will be following news about the ruling, as well as consulting with her tax preparer and attorney about any changes that will be required, since she currently works with independent contractors and takes a percentage of their session fees.
It’s an arrangement, Belk said, that is beneficial for both her business and the massage therapists. “They can stay with me as long as they want, and when other opportunities arise, they are free to go and pursue [them],” she noted.
Like many massage therapists, Belk is 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 monetarily 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.
Another company potentially affected by the April 30 ruling, BackSpace Mobile Massage, based in San Francisco, currently operates as a network of independent contractors in California’s Bay Area.
BackSpace’s three co-founders, Susan Barrick, Liam Casey and Catherine Elumba, said via email that they will be monitoring the decision and its implications for their business.
“We will be talking to our attorney to ensure that our business model stays compliant while we are trying to achieve our long-term goals,” they said.
About the Author
Allison M. Payne is a freelance writer and editor who lives in central Florida. 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.”