Employee vs. Independent Contractor - Need to carry Worker's Comp?
January 5, 2015 3:47 PM Subscribe
Help.
I'm being told by my employer that I need to buy Workers Compensation Insurance for myself to continue working for them. I believe I'm an employee and they should cover it. They believe I'm an Independent Contractor so I should pay it. This is in NYC. More info under the cut.
First off I have a regular full time job. This is just a side gig.
I'm a fitness coach working for a local gym. I teach classes (that are programmed by local gym.)
The clients are not brought in by me. They are already there as per agreements with local gym. I get paid on a per class basis via 1099.
From what I'm reading, even though I'm 1099'd, I am still an employee NOT an Independent Contractor. I use the gym's materials, the gym's programming, and all of that.
Right now, the policy I would have to carry is hefty (even though it's just for me) and I'm trying to figure out if I need to carry it, legally or if local gym needs to.
Can you help explain or point me in an easy to understand direction on how I can figure this out? I'm getting in touch with an accountant, but I want to understand from all angles.
First off I have a regular full time job. This is just a side gig.
I'm a fitness coach working for a local gym. I teach classes (that are programmed by local gym.)
The clients are not brought in by me. They are already there as per agreements with local gym. I get paid on a per class basis via 1099.
From what I'm reading, even though I'm 1099'd, I am still an employee NOT an Independent Contractor. I use the gym's materials, the gym's programming, and all of that.
Right now, the policy I would have to carry is hefty (even though it's just for me) and I'm trying to figure out if I need to carry it, legally or if local gym needs to.
Can you help explain or point me in an easy to understand direction on how I can figure this out? I'm getting in touch with an accountant, but I want to understand from all angles.
I have never heard of someone on a 1099 NOT being an Independent Contractor. Perhaps that's just my limited experience but I'm not sure why the other elements matter as much. W2 = employee. 1099 = Contractor.
posted by Potomac Avenue at 3:52 PM on January 5, 2015 [3 favorites]
posted by Potomac Avenue at 3:52 PM on January 5, 2015 [3 favorites]
It can be simultaneously true that you believe you are an employee and your employer believes you are an independent contractor. Unless you go to the IRS or court to challenge the distinction, either party can make a claim that you are either. In short, the question becomes, "does this matter enough for you to go to court over it?"
It's likely you are inappropriately classified as an independent contractor. Many people are, and employers are incentivized to do so because independent contractors are generally cheaper to employ. However, as you are now realizing, they are cheaper for the employer because many of the costs employers usually cover are pushed to the worker.
We can recite the common differentiators between independent contractors and employees for you. That said, your employer is likely not going to simply make you into an employee (setting a precedent for other coaches) just because you politely ask. If you want to pursue this, you will either need to find a new job or find legal representation. If you choose the latter, the standard warnings about pursuing legal action against your employer apply - in particular, you make yourself much less employable in the future.
posted by saeculorum at 3:56 PM on January 5, 2015 [11 favorites]
It's likely you are inappropriately classified as an independent contractor. Many people are, and employers are incentivized to do so because independent contractors are generally cheaper to employ. However, as you are now realizing, they are cheaper for the employer because many of the costs employers usually cover are pushed to the worker.
We can recite the common differentiators between independent contractors and employees for you. That said, your employer is likely not going to simply make you into an employee (setting a precedent for other coaches) just because you politely ask. If you want to pursue this, you will either need to find a new job or find legal representation. If you choose the latter, the standard warnings about pursuing legal action against your employer apply - in particular, you make yourself much less employable in the future.
posted by saeculorum at 3:56 PM on January 5, 2015 [11 favorites]
I know nothing about NY law, but in CA the gym would still need to carry worker's comp to cover work you are doing as a contractor at the gym. Even if you the contractor also carried a policy of your own.
posted by mandymanwasregistered at 4:02 PM on January 5, 2015
posted by mandymanwasregistered at 4:02 PM on January 5, 2015
I would suggest contacting the NY State Labor Commission (or the equivalent agency). They may be able to answer whether you can be obligated to carry worker's comp insurance for yourself. I know that when I worked as a 1099 contractor (although probably I was an employee) there was no mention of needing worker's comp.
posted by suelac at 4:33 PM on January 5, 2015 [1 favorite]
posted by suelac at 4:33 PM on January 5, 2015 [1 favorite]
Unless there is some specific exemption for personal trainers and gyms, you are an employee, you should not be paid via a 1099, your employer should be withholding taxes and paying into workers comp, social security &etc on your behalf, and your employer may be violating labor laws by classifying you as an independent contractor.
I am not a lawyer, but I am a small business owner and this seems like a pretty clear-cut situation to me. That is, unless there is a specific exemption for the type of work you're doing.
posted by alms at 4:34 PM on January 5, 2015 [1 favorite]
I am not a lawyer, but I am a small business owner and this seems like a pretty clear-cut situation to me. That is, unless there is a specific exemption for the type of work you're doing.
posted by alms at 4:34 PM on January 5, 2015 [1 favorite]
As you can see, there are two separate issues at work:
1. Is the gym correct in paying you as a contractor (1099) when you should actually be classified as an employee (W2)?
2. What are the local regulations regarding worker's comp and independent contractors?
The answer to #1 is not always clear cut. If you are being paid as 1099, you are not currently classified as an employee. It is possible that this classification is incorrect and the gym owes you and the IRS/state tax board some $. You can file a complaint against the gym. The gym could be audited.
The answer to #2 should ideally be easier to figure out.
posted by mandymanwasregistered at 5:14 PM on January 5, 2015 [1 favorite]
1. Is the gym correct in paying you as a contractor (1099) when you should actually be classified as an employee (W2)?
2. What are the local regulations regarding worker's comp and independent contractors?
The answer to #1 is not always clear cut. If you are being paid as 1099, you are not currently classified as an employee. It is possible that this classification is incorrect and the gym owes you and the IRS/state tax board some $. You can file a complaint against the gym. The gym could be audited.
The answer to #2 should ideally be easier to figure out.
posted by mandymanwasregistered at 5:14 PM on January 5, 2015 [1 favorite]
The fact that you are an independent contractor is not relevant. They are required to cover you for workers compensation, even if you are not a salaried employee. The fact that they have people working for them who are not salaried does get them off the hook.
However, if you are covered under a policy you purchase, they are not required to cover you under theirs.
They are wanting to save money by having you pay for your own coverage.
I was an insurance broker in New York for many years, I know whereof I speak.
posted by elf27 at 7:51 PM on January 5, 2015 [1 favorite]
However, if you are covered under a policy you purchase, they are not required to cover you under theirs.
They are wanting to save money by having you pay for your own coverage.
I was an insurance broker in New York for many years, I know whereof I speak.
posted by elf27 at 7:51 PM on January 5, 2015 [1 favorite]
Best answer: You'll be interested to know that specifically for Workers' Comp, NY State has even more inclusive criteria for employee classification than usual:
Under the Workers' Compensation Law, most individuals providing services to a for-profit business will be deemed an employee of that business and therefore must be covered by the employer for workers' compensation insurance.
You meet every criteria on that list, no doubt: you perform the primary work that is the gym's main business, they set the hours, and so on. I am also pretty confident your gym knows this - as a small business owner who knows lots of other small business owners, I can tell you that everyone butts up against these questions early on and the answers are pretty clear. However, as others had pointed out, it comes down less to whether you are right and more to what you can actually do about it.
Do you have any bargaining power with your gym? I freelanced in NYC for over 10 years as a software engineer with an in-demand skill set and I've had all kinds of shady employment terms proposed to me, from having to carry extra insurance with ridiculous coverage limits to non-compete provisions so severe that they would essentially ban me from offering my services to other employers. I never accepted those terms and they were always removed, but like I said, I had an in-demand skill set so I held all the cards. If your gym has plenty of more "compliant" contractors to choose from then I am not sure what you can do beside maybe getting the Department of Labor to audit them (a very long shot if your gym is not some very large national chain).
If you have no bargaining power but you still want to try to get around the worker's comp requirement, you could try this risky gambit: tell them that you will get the insurance, delay until you actually start working, and then tell them you've called the Worker's Comp Board and they assured you it's the employer's responsibility. If they bristle, say you can call again to clarify but don't want to get them in trouble as during the first call it was mentioned how it's illegal for employers to misclassify employees as "independent contractors", etc.
posted by rada at 8:13 AM on January 6, 2015 [1 favorite]
Under the Workers' Compensation Law, most individuals providing services to a for-profit business will be deemed an employee of that business and therefore must be covered by the employer for workers' compensation insurance.
You meet every criteria on that list, no doubt: you perform the primary work that is the gym's main business, they set the hours, and so on. I am also pretty confident your gym knows this - as a small business owner who knows lots of other small business owners, I can tell you that everyone butts up against these questions early on and the answers are pretty clear. However, as others had pointed out, it comes down less to whether you are right and more to what you can actually do about it.
Do you have any bargaining power with your gym? I freelanced in NYC for over 10 years as a software engineer with an in-demand skill set and I've had all kinds of shady employment terms proposed to me, from having to carry extra insurance with ridiculous coverage limits to non-compete provisions so severe that they would essentially ban me from offering my services to other employers. I never accepted those terms and they were always removed, but like I said, I had an in-demand skill set so I held all the cards. If your gym has plenty of more "compliant" contractors to choose from then I am not sure what you can do beside maybe getting the Department of Labor to audit them (a very long shot if your gym is not some very large national chain).
If you have no bargaining power but you still want to try to get around the worker's comp requirement, you could try this risky gambit: tell them that you will get the insurance, delay until you actually start working, and then tell them you've called the Worker's Comp Board and they assured you it's the employer's responsibility. If they bristle, say you can call again to clarify but don't want to get them in trouble as during the first call it was mentioned how it's illegal for employers to misclassify employees as "independent contractors", etc.
posted by rada at 8:13 AM on January 6, 2015 [1 favorite]
This thread is closed to new comments.
posted by slidell at 3:52 PM on January 5, 2015 [1 favorite]