Massage Independent Contractors

One of the biggest issues in the massage profession is that many employers of massage therapists will incorrectly classify their workers as independent contractors when they really should be employees. It is important that you understand the difference between the two and know how to use this in your favor when looking for a job in massage. Use this information to get you started in researching this information to apply to your own needs – whether you are looking for a job in massage or looking to hire employees/independent contractors. While this information has been put together after many hours of research, it does not constitute legal advice.

Please consult an attorney and a tax accountant to make sure you have the correct classification for YOUR situation.

First off there are Federal Requirements for Independent Contractors set up by the IRS and The Department of Labor. There are also State requirements which may be a little bit different than the Federal requirements making it even more confusing.

Department of Labor and the Independent Contractor

Let’s start with the Department of Labor as one of their first points of clarification is what really affects all massage businesses that hire massage therapists. In their fact sheet Fact Sheet #13: Am I an Employee? (PDF): Employment Relationship Under the Fair Labor Standards Act (FLSA)

The extent to which the work performed is an integral part of the employer’s business. If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business for himself or herself. For example, work is integral to the employer’s business if it is a part of its production process or if it is a service that the employer is in business to provide.

I don’t know of any massage or spa business where massage is not an integral part of the business. End of any discussion right there.

The other 5 points in that fact sheet when applied to a massage business usually point to a massage therapist must be an employee.

#2. Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss? Massage therapists usually depend on the employer to bring clients in for them to make money.

#3 How does the Worker’s Business Investment Compare with the Employer’s Business Investments? The worker must share the risk of loss to be considered a true independent contractor.

#4 Does the Work Performed Require Special Skill and Initiative? Workers must not be economically dependent on the employer as in they have other jobs that bring in income. Most IC positions in the massage profession depend on the employer

#5 Is the Relationship Between the Worker and Employer Permanent or Indefinite? A true IC position will have a beginning and end date.

#6. What is the Nature and Degree of the Employer’s Control?

The IRS and Independent Contractors

The IRS also has their own requirement for independent contractors. It is not enough to just get a 1099 to signify that you are and IC. The IRS uses a 20 point questionnaire to determine status. It matters to the IRS because they will make more money when people are classified as employees. If you are misclassified, the IRS can come in and ask you to pay all of the back taxes and fees that will most likely put you out of business. See:

Judge orders Redmond Herbal Spas to pay employees $135,536 in back wages and liquidated damages

The 20 factors identified by the IRS are as follows ( from: PRESENT LAW AND BACKGROUND (PDF) RELATING TO WORKER CLASSIFICATION FOR FEDERAL TAX PURPOSES

1.Instructions: If the person for whom the services are performed has the right to require compliance with instructions, this indicates employee status.

2.Training: Worker training (e.g., by requiring attendance at training sessions) indicates that the person for whom services are performed wants the services performed in a particular manner (which indicates employee status).

3. Integration: Integration of the worker’s services into the business operations of the person for whom services are performed is an indication of employee status.

4. Services rendered personally: If the services are required to be performed personally, this is an indication that the person for whom services are performed is interested in the methods used to accomplish the work (which indicates employee status).

5.Hiring, supervision, and paying assistants: If the person for whom services are performed hires, supervises or pays assistants, this generally indicates employee status. However, if the worker hires and supervises others under a contract pursuant to which the worker agrees to provide material and labor and is only responsible for the result, this indicates independent contractor status.

6. Continuing relationship: A continuing relationship between the worker and the person for whom the services are performed indicates employee status.

7. Set hours of work: The establishment of set hours for the worker indicates employee status.

8. Full time required: If the worker must devote substantially full time to the business of the person for whom services are performed, this indicates employee status. An independent contractor is free to work when and for whom he or she chooses.

9.Doing work on employer’s premises: If the work is performed on the premises of the person for whom the services are performed, this indicates employee status, especially if the work could be done elsewhere.

10. Order or sequence test: If a worker must perform services in the order or sequence set by the person for whom services are performed, that shows the worker is not free to follow his or her own pattern of work, and indicates employee status.

11. Oral or written reports: A requirement that the worker submit regular reports indicates employee status.

12.Payment by the hour, week, or month: Payment by the hour, week, or month generally points to employment status; payment by the job or a commission indicates independent contractor status.

13. Payment of business and/or traveling expenses. If the person for whom the services are performed pays expenses, this indicates employee status. An employer, to control expenses, generally retains the right to direct the worker.

14. Furnishing tools and materials:The provision of significant tools and materials to the worker indicates employee status.

15. Significant investment: Investment in facilities used by the worker indicates independent contractor status.

16. Realization of profit or loss: A worker who can realize a profit or suffer a loss as a result of the services (in addition to profit or loss ordinarily realized by employees) is generally an independent contractor.

17. Working for more than one firm at a time: If a worker performs more than deminimis services for multiple firms at the same time, that generally indicates independent contractor status.

18. Making service available to the general public: If a worker makes his or her services available to the public on a regular and consistent basis, that indicates independent contractor status.

19. Right to discharge: The right to discharge a worker is a factor indicating that the worker is an employee.

20. Right to terminate: If a worker has the right to terminate the relationship with the person for whom services are performed at any time he or she wishes without incurring liability, that indicates employee status.

State Laws and the Independent Contractor

On top of the Department of Labor and the IRS you will also have state officials after you if have hired misclassified employees. They will want their back unemployment insurance fees and workers compensation fees paid back.

Independent contractors

So who is an IC? Personally, I think that they will be really rare instances of someone actually being an IC in the massage profession. I actually can’t even think of a situation that would qualify.

Independent Contractors will have their own business and will set their own fees among other things.

They should have multiple businesses that they work for and not work at one place all of the time. They are their own boss in every way and set their fees and send invoices to the business for payment of services. They would provide all of the equipment – tables, lotions/oils, pillows etc. They would do their own marketing and not depend on the owner for business.

For the most part from what I understand whenever you are a subcontractor it is best to be paid a flat rate for each massage that you do. When you are paid a percentage of each massage the relationship with the employer becomes confusing to say the least.

The employer is responsible for knowing how to hire you as an independent contractor. If they are trying to pay you a percentage you might want to bring the laws to their attention. There are many reasons why an employer would try to pay you a percentage with the main reason usually about making money for themselves. While an employer deserves to be paid for the use of the room and providing clients there should also be a limit. It will also depend on what is provided by the employer.

Why does this matter?

Massage therapists may feel like an IC position is a better way to go but there are so many misclassified IC positions out there with massage therapists who are struggling to make ends meet. They are being taken advantage of for all their hard work and time. You deserve to be paid and paid well for what you do.

What this means for employers is that you will have to be sure you have the resources to hire massage therapists and be able to get them enough clients so that you can make enough to pay them fairly. No more taking advantage of massage therapists and not paying them what they are worth.

For massage therapists starting out, having an IC position was often an easier way to start as you didn’t have to pay for space when you were not using it. This just means that you will need to work harder to ensure you have clients if/when you want to open your own business. As an employee you should get benefits such as vacation and sick time and see regular increases in pay as your skills and experience progress.

Resources

Thanks to Angela Lind and Della Szeszol Melville in the many Facebook forums for always taking time to explain this and gathering the information presented here.

Be sure to read as many articles and resources as you can about determining your status. Here is a collection of them that I have found to provide solid information but again I am not an attorney!

I highly recommend these books and resources!

IRS Website – Employee vs Contractor

Form SS8 of the IRS to have them determine your status fill out this form. Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

Employees and Independent Contractors, Part 1 Business Side By Felicia Brown Massage and Bodywork Magazine

Employees and Independent Contractors, Part 2 Business Side By Felicia Brown Massage and Bodywork Magazine

Success with the IRS by Dixie Wall Contributing Editor Massage Today

Independent Contractor, Employee, Booth Renter: Which Piece Am I? Business Side By Ken Cassidy Massage and Bodywork Magazine

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Comments

Steve says

July 1, 2014 at 4:50 pm

Individual states also have for independent contractors. The State of Washington states that it is possible for an employer to be in compliance with IRS guidelines for hiring an IC and still not be compliant with state rules.

Irene Diamond, RT, Biz Mentor says

January 8, 2016 at 3:14 am

Julie,
The portion on ‘an integral part of the business’ is key.

Based on our own wellness center’s experience of an employee classification audit for 2002 by the EDD, and through consulting for many other wellness businesses over the years, this is the main point that will usually sway them towards classifying the worker as an employee rather than as an IC.

“work is integral to the employer’s business if it is a part of its production process or if it is a service that the employer is in business to provide.”

In most massage therapy places, the massage business could not exist without the massage service providers, therefore their work is absolutely integral.

In my experience, most workers should be classified as employees and are in fact misclassified as ICs while being treated as employees, without the employee benefits.

There are other options for business owners to structure their business to comply with the state and government laws, while also not having employees, but they must understand the laws and take the correct steps to follow all the rules.

AnonymousAttorneyWhoCares says

October 8, 2016 at 1:21 am

Julie,

First, I am a lawyer. Second, by writing this article you are illegally engaging in the practice of law. Please respond if you are in fact a lawyer who has passed the Washington bar exam, in which case you should be disbarred for misinforming your readers about the law. Your advice is way off the mark. There are many good and legal clinic situations with massage practitioners functioning as independent contractors. Smart readers will disregard this article and look for advice elsewhere.

- Julie Onofrio says
  
  October 9, 2016 at 1:46 am
  
  No I am not a lawyer – what is inaccurate in this article? When would a Massage therapist be considered an IC when most massage businesses have massage as their main source of income making it fall under the very first thing listed:
  “The extent to which the work performed is an integral part of the employer’s business. If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business for himself or herself. For example, work is integral to the employer’s business if it is a part of its production process or if it is a service that the employer is in business to provide.”