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Properly Classifying Workers as Employees or Independent Contractors

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Paul R. Bedard, EsquirePaul R. Bedard, Esquire

The typical health club operates with a diverse group of people, including managers, personal trainers, group instructors, salespeople, childcare providers and more. The business bears the responsibility of properly classifying each of these people within each respective role as either an employee or an independent contractor. For employees, the business must withhold and apply payments for income taxes, Social Security, Medicare and unemployment tax. If the business is found to have misclassified an employee as an independent contractor, fines, penalties, interest, any employee benefits due, and even criminal charges may accompany the organization's resulting diminished goodwill.

Correctly classifying a worker involves analyzing three primary categories: Behavioral Control, Financial Control, and the Relationship Between the Parties. A fact-specific analysis is required in this respect. Although some scenarios present facts for evaluation seemingly in black and white, unfortunately, other scenarios present in shades of gray.

Behavioral Control

Behavioral Control refers to the degree of control possessed by the business as it relates to how the worker performs his work. When the business has the right to direct and control how work is performed, even in the absence of exercising this right, the worker in question will be classified as an employee. The type and degree of instructions given, the presence of an evaluation system and the amount of ongoing worker training are all factors that are taken into consideration when trying to assess behavioral control.

Type of instruction can include but is not limited to when a worker must report to work; where the worker must report to work; what specific steps, if any, the worker must take when performing work; what additional people the worker must hire or specifically assign to work; and what tools or equipment the worker must use while performing work. The greater the degree of detail within these instructions, the greater the degree of control within the instruction. With this increasing degree of control comes a correlating increasing probability that the worker is an employee.

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