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Wednesday, October 26, 2016

Distinguishing between employees and independent contractors

Distinguishing between employees and independent contractors
Yoga Vida NYC (Commissioner of Labor), 2016 NY Slip Op 06940, Court of Appeals

On October 25, 2016 this LawBlog posted summaries of two decisions by the Appellate Division, Third Department: Cole (Niagara Falls Housing Authority--Commissioner of Labor), 2016 NY Slip Op 06281 and Devore v DiNapoli, 2016 NY Slip Op 06934, both addressing whether an individual was an employee or an independent contractor of the entity for which services were provided [see].

Coincidentally, on October 25, 2016 the Court of Appeals handed down its decision in Yoga Vida NYC (Commissioner of Labor), another case involving a contest between an employer, Yoga Vida, contending certain individuals providing instruction in yoga were independent contractors while the Unemployment Insurance Appeal Board determined that those individuals were employees of Yoga Vida.

Yoga Vida operated a yoga studio offering classes taught by both staff instructors and non-staff instructors. It classified its non-staff instructors as independent contractors. The Commissioner of Labor issued a determination that Yoga Vida was liable for additional unemployment insurance contributions based on its finding that the non-staff instructors were employees and not independent contractors. Yoga Vida challenged the ruling and an Administrative Law Judge [ALJ] sustained Yoga Vida's objection, concluding that the non-staff instructors were independent contractors.

The Commissioner of Labor appealed the ALJ's decision to the Unemployment Insurance Appeal Board and the Board reversed the ALJ’s decision, sustaining the Department’s initial determination that Yoga Vida was liable for additional unemployment insurance contributions at issue.

Yoga Vida's appeal to the Appellate Division was unsuccessful as the panel, in affirming the determination of the Appeal Board, holded that "[o]verall, despite the existence of evidence that could result in a contrary result, the record contains substantial evidence to support the Board's decision that Yoga Vida had sufficient control over the instructors' work, thereby allowing for a finding of an employer-employee relationship." Yoga Vida next appealed the Appellate Division’s decision to the Court of Appeals.

A majority of the Court of Appeals* overturned the Appellate Division’s ruling, explaining that in this instance the record as a whole did not demonstrate “that the employer exercises control over the results produced and the means used to achieve the result.” In the words of the court, “… the Board's determination that the company exercised sufficient direction, supervision and control over the instructors to demonstrate an employment relationship is unsupported by substantial evidence.”

The Court of Appeals indicated that the record before it showed that:

a. The non-staff instructors make their own schedules and choose how they were paid -- either hourly or on a percentage basis;

b. Non-staff instructors were paid only if a certain number of students attend their classes. In contrast, staff instructors were paid regardless of whether anyone attended a class;

c. Staff instructors could not work for competitor studios within certain geographical areas while the non-staff instructors could teach at other locations and were free to tell Yoga Vida students of classes they would teach at other locations so the students could  follow them to another studio if they wish; and

d. Only staff instructors, as distinct from non-staff instructors, were required to attend meetings or receive training.

The court noted that the “incidental controls” relied upon by the Board in reaching its determination, included:

a.  Yoga Vida satisfying itself that the independent instructors possessed the proper licenses;

b. Published a master schedule on its web site; and

c. Provided the space for the classes conducted by the independent instructors.

These "incidental controls," said the court, do not support the conclusion that the instructors are employees nor does the fact that Yoga Vida generally determined what fee was charged, collected the fee directly from the students, and provided a substitute instructor if the non-staff instructor was unable to teach a class and could not find a substitute, “does not supply sufficient indicia of [Yoga Vida’s] control over the [independent] instructors.”

The Court of Appeals, noting that Yoga Vida received feedback about the instructors from the students, said that this did not support the Board's conclusion that the non-staff personnel were employees. Significantly, the court observed that "[t]he requirement that the work be done properly is a condition just as readily required of an independent contractor as of an employee and not conclusive as to either."

The matter was remitted to the Appellate Division with directions to remand to the matter Commissioner of Labor “for further proceedings in accordance with the memorandum herein.”

* Chief Judge DiFiore and Judges Pigott, Abdus-Salaam and Garcia concur in reversing the Appellate Division’s decision. Judge Fahey dissented and voted to affirm in an opinion in which Judge Rivera concurred. Judge Stein took no part.

The decision is posted on the Internet at:
Top of Form
Bottom of Form

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