I usually blog about New Jersey unemployment cases and determinations but there is an interesting case that was just decided in New York that is worth noting. Although the legal standard for entitlement to unemployment benefits differs between the states, both New Jersey and New York ultimately look to see how much “control” the business exercises over the worker in making its determination on how the relationship should be classified. The more control a business has over the worker in the nature and manner of the work performed, the more likely it is that he or she will be considered an employee who is entitled to unemployment benefits.
In the New York case, Yoga Vida NYC, Inc. v. Commissioner of Labor, No. 130 (N.Y. Oct. 25, 2016), the New York State Court of Appeals issued a rare decision, concluding that the employer yoga studio did not exercise sufficient control over certain of its instructors to create an employment relationship, thereby disqualifying the workers for unemployment compensation benefits.
Yoga Vida, a Manhattan-based yoga studio, offers classes taught by both staff instructors, classified as employees, and non-staff instructors, classified as independent contractors. The NYS Unemployment Insurance Appeal Board held that the non-staff instructors were misclassified as independent contractors and that Yoga Vida was therefore responsible for paying additional unemployment contributions. Yoga Vida appealed to the Appellate Division, which affirmed the determination of the Appeal Board. The NYS 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.”
The Court relied on the following in support of its decision:
- The instructors made their own schedules and chose how they were paid – either hourly or on a percentage basis;
- The non-staff instructors were only paid if a certain number of students attended their classes (the staff instructors were paid regardless of whether anyone attended a class);
- Yoga Vida did not restrict the non-staff instructors from teaching at other studios;
- The instructors were not required to attend staff meetings or receive training.
The Court found that the “incidental control” the studio exercised over the non-staff workers, such as determining if the instructors had the proper licenses; publishing a master schedule on its web site; providing space for the classes; and providing a substitute instructor, if necessary – did not warrant a finding of employee status. The Court did not view as dispositive that the studio 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.
Employers and workers need to understand that all employment classifications determinations are fact-dependent. I recommend that businesses conduct a self-assessment of their independent contractor models, with the supervision of counsel, to determine the risk of a classification challenge from their independent contractors or government agencies.