Special Legal Issues for Independent Contractors working in a gym

Special Legal Issues for Independent Contractors working in a gym

Where you train clients and your employment relationship (whether as an employee or a contractor) may change your risk of liability drastically. Let’s talk about the special issues for independent contractors working in a gym setting.

The first question is to ask: Are you really a contractor?

This is a fundamental question; however, we won’t be addressing this in detail in this post.

If you and your attorney are satisfied you are a contractor, it is time to consider some other issues that arise in the context of working as a contractor in a gym.

Decide what the best type of entity is best for your business. Some states, like Colorado, specifically require independent contractors to register on a government website. Taking time to think through the best entity for your business can save you a great deal of money and heartache in the future. An attorney with experience in the fitness industry can help you with this.

One of the most important areas when you can protect yourself from a negative outcome should you be sued or should a client be injured is to make sure you are appropriately and sufficiently covered by insurance – whether through general liability, errors and omissions insurance, and professional liability insurance. Best to speak to an attorney and an insurance broker to explore what would be sufficient for your situation and circumstances.

Your independent contractor agreement with the gym should address matters around insurance, worker’s compensation premiums, and the implications of liability should one of your clients be injured by a piece of gym equipment. Don’t assume that you will be protected by the gym’s insurance or that they will accept liability for injury to yourself or to one of your clients even if such injury takes place on their property. Have an attorney look over any subcontract or contractor agreement before you sign it to make sure that it is not unfavorable to you as an independent contractor.

Independent Contractors are responsible for paying their own State and Federal income taxes, including social security and medicare, and unemployment taxes, after receiving full payment from the Company with whom they have contracted. An independent contractor will be required to issue W-2 forms to their own staff, and generate 1099’s for their own contractors, and report all paid wages to the IRS.

Be aware that a gym who employs you as an independent contractor is required to exercise reasonable care to ensure that you are both fit (in a legal sense) and able to perform the particular type of work for which you are hired. Note also that a gym who employs independent contractors cannot delegate the responsibility for taking adequate precautions against negligence, or injury, to those contractors. What this means in practice is that you may be required to follow certain protocols or procedures as part of their contract, provide proof of insurance to the gym owners including General Liability, and Auto insurance, your Tax ID number (whether EIN or SSN), and even a business card to demonstrate you operate a stand alone business separate from the gym.

According to the IRS, a company that an independent contractor has contracted with “has only the right to control or direct the result of [the independent contractor’s] work, not what will be done, or how it will be done.” In the case of personal training, the trainer must have the right to control the details of the training sessions and the specific methods of training if they are to maintain independent contractor status. A gym is unlikely to provide you with the tools with which to do your job because this is one of the tests that determines if a person is an employee or an independent contractor. There is a fine line here with the use of gym equipment – this is where a gym may say that you must assume all risks with using equipment to train and that their liability does not extend to your misuse of equipment. As an independent contractor, you will not have your expenses reimbursed (including advertising, assessment tools and paperwork) and you will be making investments into your business with your own money.

Be aware that by signing an exclusive agreement you may be giving up your status as an independent contractor. Being an independent contractor enables you to be free to work for other gyms and companies. This is why it is important to be wary of “non compete” clauses within contractor agreements. In most cases, an independent contractor cannot be prevented from seeking work or training opportunities at another facility or with another company while working with the first company. An independent contractor also has a general right to refuse assignments – therefore if there is a client you don’t want to work with, or a particular methodology you are not comfortable with you have a right to refuse (as long as you haven’t signed away this right).  On the other hand, an employee can be required not to training at another location or in a client’s home, are not permitted to refuse assignments, and can be required to use specific methods and exclusive programs through a non-compete in their contract.

It is important to note that an independent contractor can be required to sign a non-disclosure agreement. Usually, a non-disclosure will contain clauses which bar an independent contractor from recruiting trainers from the gym where they have a contract, and prevent a contractor from seeking the business of clients of the gym for a specified period of time. In addition, a non-disclosure often forbids an independent contractor from making use of information they learn during their contract period, that would not otherwise publicly available – usually extending for a period of time beyond the termination of the relationship. Be aware that you should have such an agreement reviewed by an attorney prior to signing. Legal principles dictate that a company should only seek to limit the actions of an independent contractor if it would directly interfere with that company doing business. Most non-disclosure agreements extend to a period of between 6 (six) months and 2 (two) years following the termination of the contractual period (or relationship) and be reasonably geographically limited. This last part will be dependent on the state you are in and should be reviewed with an attorney.

You will likely be responsible for invoicing the gym for payment – although this will generally be detailed in your contractor agreement. Speak with an attorney, and an accounting professional, about the pros and cons of being paid in the name of your business entity as opposed to in your own name. Some states indicate a preference – Colorado, for instance, statutorily prefers independent contractors to be paid in the name of the business entity to overcome an assumption that to be paid in your own name makes you an employee rather than an independent contractor.

Working as an independent contractor in gym settings can provide a fitness professional with the independence and ability to build their business in a manner that is sustainable and could potentially reap far greater financial rewards than an employee would be able to in the same environment. However, such opportunities come with challenges and the possibility of risk. Doing your due diligence and seeking out sound legal and professional advice can mitigate these risks and give you a great springboard as you set about developing your fitness business

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