In the Matter of Yoga Vida NYC, Inc., Appellant. Commissioner of Labor, Respondent.BriefN.Y.September 6, 2016APL-2014-00285 To be argued by: VALERIE FIGUEREDO 15 minutes requested Appellate Division – Third Department, No. 518112 State of New York Court of Appeals In the Matter of YOGA VIDA NYC, INC., Appellant. COMMISSIONER OF LABOR, Respondent. BRIEF FOR COMMISSIONER OF LABOR BARBARA D. UNDERWOOD Solicitor General STEVEN C. WU Deputy Solicitor General VALERIE FIGUEREDO Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Commissioner of Labor 120 Broadway New York, New York 10271 (212) 416-8019 (212) 416-8962 (facsimile) Dated: June 5, 2015 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ............................................................ iii PRELIMINARY STATEMENT ........................................................ 1 QUESTION PRESENTED ............................................................... 3 STATEMENT OF THE CASE ......................................................... 3 A. The State’s Unemployment Insurance Law .................. 3 B. The Pervasiveness of Employer Misclassification of Employees as Independent Contractors .................... 5 C. Factual Background ..................................................... 11 1. Yoga Vida’s business ............................................. 11 2. Yoga Vida’s instructors ......................................... 13 D. Procedural Background ............................................... 17 1. The Commissioner’s initial determination ........... 17 2. The Unemployment Insurance Appeal Board’s determination .......................................... 18 3. The Appellate Division’s decision ......................... 19 ARGUMENT ................................................................................. 20 SUBSTANTIAL EVIDENCE SUPPORTS THE BOARD’S FACTUAL FINDING THAT ALL OF YOGA VIDA’S INSTRUCTORS ARE EMPLOYEES ......................... 20 i TABLE OF CONTENTS (cont'd) Page A. Nonstaff Instructors Are Integral to Yoga Vida’s Core Business of Providing Yoga Instruction. ......................................................... 24 B. Yoga Vida Exercises Broad Control and Supervision Over Nonstaff Instructors. ............. 32 C. The Appellate Division Did Not Ignore Factors Indicative of a Lack of Control. ............. 52 CONCLUSION ............................................................................... 63 ii TABLE OF AUTHORITIES Cases Page(s) Alexander v. FedEx Ground Package System, 765 F.3d 981 (9th Cir. 2014) .......................................... 28, 29, 40 Angelotti v. Walt Disney Co., 192 Cal. App. 4th 1394 (2011) ................................................... 38 Avis Rent A Car Sys., Inc. v. United States, 503 F.2d 423 (2d Cir. 1974) ................................................. 29, 46 Awuah v. Coverall N. Am., 707 F. Supp. 2d 80 (D. Mass. 2010) ........................................... 30 Baker v. Flint Eng’g & Const. Co., 137 F.3d 1436 (10th Cir. 1998) .................................................. 28 Barak v. Chen, 87 A.D.3d 955 (2d Dep’t 2011) ................................................... 41 Breaux & Daigle, Inc. v. United States, 900 F.2d 49 (5th Cir. 1990) ...................................... 22, 28, 42, 46 Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042 (5th Cir. 1987) .................................................... 37 Brock v. Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1988) ......................................... 28, 37, 50 Bynog v. Cipriani Group, 1 N.Y.3d 193 (2003) ................................................................... 57 Cal. Emp’t Comm’n v. L.A. Down Town Shopping News Corp., 24 Cal. 2d 421 (1944) ................................................................. 30 Carpet Remnant Warehouse, Inc. v. N.J. Dep’t of Labor, 125 N.J. 567 (1991) .................................................................... 28 iii TABLE OF AUTHORITIES (cont’d) Cases Page(s) Corporate Express Delivery Sys. v. NLRB, 292 F.3d 777 (D.C. Cir. 2002) ...................................................... 6 Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362 (1998) ................................................................. 61 Eisenberg v. Advance Relocation & Storage, Inc., 237 F.3d 111 (2d Cir. 2000) ........................................... 28, 59, 60 Gen. Inv. Corp. v. United States, 823 F.2d 337 (9th Cir. 1987) ................................................ 42, 46 Gilmore v. United States, 443 F. Supp. 91 (D. Md. 1977) ................................................... 58 Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28 (1961) ...................................................................... 61 Hernandez v. Chefs Diet Delivery, LLC, 81 A.D.3d 596 (2d Dep’t 2011) ..................................................... 6 Johnson v. Berkofsky-Barret Prods., 211 Cal. App. 3d 1067 (1989) ................................................ 29-30 Lambersten v. Utah Dep’t of Corr., 79 F.3d 1024 (10th Cir. 1996) .................................................... 28 Lehigh Valley Coal Co. v. Yensavage, 218 F. 547 (2d Cir. 1914) ........................................................... 34 Martin v. Selker Bros., Inc., 949 F.2d 1286 (3d Cir. 1991) ..................................................... 28 Matter of 12 Cornelia St. (Ross), 56 N.Y.2d 895 (1982) ..................................................... 24, 32, 50 iv TABLE OF AUTHORITIES (cont’d) Cases Page(s) Matter of Barnaba Photographs Corporation (Miller), 289 N.Y. 587 (1942) ............................................................. 56, 57 Matter of Barone (Comm’r of Labor), 257 A.D.2d 950 (3d Dep’t 1999) ................................................. 28 Matter of Basin St., Inc. (Lubin), 6 N.Y.2d 276 (1959) ............................................................. 57, 58 Matter of Cassaro (Horton), 89 A.D.3d 1288 (3d Dep’t 2011) ................................................. 39 Matter of Charles A. Field Delivery Serv. (Roberts), 66 N.Y.2d 516 (1985) ................................................................. 49 Matter of Clorfeine (N.Y. Open Ctr.), 187 A.D.2d 840 (3d Dep’t 1992) ................................................. 33 Matter of Cohen, 67 N.Y.2d ............................................................................. 46, 47 Matter of Columbia Artists Mgmt. (Comm’r of Labor), 109 A.D.3d 1055 (3d Dep’t 2013) ................................... 46, 55, 58 Matter of Concourse Ophthalmology Assocs. (Roberts), 60 N.Y.2d 734 (1983) ......................................................... passim Matter of Di Martino (Buffalo Courier Express Co.), 59 N.Y.2d 638 (1983) ................................................................. 35 Matter of Donna Parker Habitat (Comm’r of Labor), 281 A.D.2d 728 (3d Dep’t 2001) ................................................. 55 Matter of Electrolux Corp. (Miller), 288 N.Y. 440 (1942) ................................................................... 57 v TABLE OF AUTHORITIES (cont’d) Cases Page(s) Matter of Empire State Towing & Recovery Ass’n (Comm’r of Labor), 15 N.Y.3d 433 (2010) ........................................................... 21, 39 Matter of Encore Music Lessons LLC (Comm’r of Labor), 2015 N.Y. Slip Op. 04553 (3d Dep’t 2015) ................................. 29 Matter of Esposito (Nat’l Write Your Congressman, Inc.), 264 A.D.2d 927 (3d Dep’t 1999) ................................................. 62 Matter of Ferrara (Catherwood), 10 N.Y.2d 1 (1961) ................................................................. 4, 22 Matter of Fitness Plus (Comm’r of Labor), 293 A.D.2d 909 (3d Dep’t 2002) ................................................. 58 Matter of Froehlich (Am. Mgmt. Ass’n), 184 A.D.2d 946 (3d Dep’t 1992) ................................................. 59 Matter of Goddard (Summit Health, Inc.), 118 A.D.3d 1200 (3d Dep’t 2014) ............................................... 29 Matter of Goldstein (Roberts), 61 N.Y.2d 937 (1984) ............................................... 47, 49, 50, 54 Matter of Gordon v. N.Y. Life Ins. Co., 300 N.Y. 652 (1950) ................................................................... 22 Matter of John Lack Assocs., LLC (Comm’r of Labor), 112 A.D.3d 1042 (3d Dep’t 2013) ............................................... 31 Matter of Lambert (Staubach Retail Servs. Inc.), 18 A.D.3d 1049 (3d Dep’t 2005) ............................................. 5, 47 Matter of Litts v. Risley Lumber Co., 224 N.Y. 321 (1918) ..................................................................... 5 vi TABLE OF AUTHORITIES (cont’d) Cases Page(s) Matter of Machcinski (Ford Motor Co.), 277 A.D. 634 (3d Dep’t 1951) ....................................................... 4 Matter of Martin (Crest-Mainstream, Inc.), 259 A.D.2d 824 (3d Dep’t 1999) ................................................. 33 Matter of MNORX, Inc. (Ross), 46 N.Y.2d 985 (1979) ................................................................. 21 Matter of Mydland (N. Shore Equestrian Ctr.), 221 A.D.2d 748 (3d Dep’t 1995) ................................................. 33 Matter of Nance (NYP Holdings Inc.), 117 A.D.3d 1294 (3d Dep’t 2014) ............................................... 29 Matter of O’Toole (Biomet Marx & Diamond, Inc.), 13 A.D.3d 767 (3d Dep’t 2004) ................................................... 61 Matter of Piano Sch. of N.Y. City (Comm’r of Labor), 71 A.D.3d 1358 (3d Dep’t 2010) ........................................... 40, 55 Matter of Polinsky (Hartnett), 163 A.D.2d 684 (3d Dep’t 1990) ..................................... 42, 47, 62 Matter of Prof’l Career Ctr. (Comm’r of Labor), 105 A.D.3d 1219 (3d Dep’t 2013) ............................. 45, 47, 49, 50 Matter of Salamanca Nursing Home, Inc. (Roberts), 68 N.Y.2d 901 (1986) ..................................................... 21, 35, 45 Matter of Scanlan v. Buffalo Pub. Sch. Sys., 90 N.Y.2d 662 (1997) ................................................................. 22 Matter of Scatola (Bronx Home News Publ’g Co.), 282 N.Y. 689 (1940) ................................................................... 30 vii TABLE OF AUTHORITIES (cont’d) Cases Page(s) Matter of Spinnell (Comm’r of Labor), 300 A.D.2d 770 (2002) ................................................................ 47 Matter of Ted Is Back Corp. (Roberts), 64 N.Y.2d 725 (1984) ................................................................. 40 Matter of Van Teslaar v. Levine, 35 N.Y.2d 311 (1974) ................................................................... 3 Matter of Viig (Hello World Language Ctr.), 66 A.D.3d 1064 (3d Dep’t 2009) ..................................... 36, 45, 52 Matter of Villa Maria Inst. of Music (Ross), 54 N.Y.2d 691 (1981) ........................................................... 21, 47 Matter of Wassey (Kenmark Optical Co.), 255 A.D.2d 650 (3d Dep’t 1998) ........................................... 59, 62 Matter of Williams (Comm’r of Labor), 268 A.D.2d 621 (3d Dep’t 2000) ................................................. 28 Matter of Wilson Sullivan Co. (Miller), 289 N.Y. 110 (1942) ................................................................... 36 Matter of Zelenka (Versace Profumi USA), 304 A.D.2d 927 (3d Dep’t 2003) ................................................. 59 McLaughlin v. Seafood, Inc., 861 F.2d 450 (5th Cir. 1988) ...................................................... 27 Nationwide Mut. Ins. v. Darden, 503 U.S. 318 (1992) .................................................................... 28 Peno Trucking, Inc. v. Comm’r of Internal Revenue, 296 F. App’x 449 (6th Cir. 2008) ................................................ 46 viii TABLE OF AUTHORITIES (cont’d) Cases Page(s) Potter v. C.I.R., T.C. Memo. 1994-356, 1994 WL 388984 (T.C.M. (CCH) 1994) ............................................................ 38, 56 Quinteros v. Sparkle Cleaning, Inc., 532 F. Supp. 2d 762 (D. Md. 2008) ............................................ 29 Rainbow Development, LLC v. Mass. Dep’t of Industrial Accidents, 2005 WL 3543770 (Superior Court Mass. Nov. 17, 2005)......... 30 Reichert v. N. MacFarland Builders, Inc., 85 A.D.2d 767 (3d Dep’t 1981) ................................................... 61 Rivera v. Hospital Universitario, 762 F. Supp. 15 (D. P.R. 1991) .................................................. 37 Robb v. Unites States, 80 F.3d 884 (4th Cir. 1996) ........................................................ 48 Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947) .............................................................. 28, 30 Scantland v. Jeffry Knight, Inc., 721 F.3d 1308 (11th Cir. 2013) .................................................. 28 Schramm v. C.I.R., T.C. Memo. 2011-212, 2011 WL 3835670 (T.C.M. (CCH) 2011) .................................................................. 38 Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298 (4th Cir. 2006) ...................................................... 28 Scott v. Mass. Mut. Life Ins. Co., 86 N.Y.2d 429 (1995) ................................................................... 6 ix TABLE OF AUTHORITIES (cont’d) Cases Page(s) Sec’y of Labor v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987) .................................................... 28 United States v. Silk, 331 U.S. 704 (1947) ........................................................ 26, 29, 30 Walling v. Twyeffort, Inc., 158 F.2d 944 (2d Cir. 1947) ....................................................... 55 Weber v. Comm’r of Internal Revenue, 60 F.3d 1104 (4th Cir. 1995) ...................................................... 46 State Laws 2008 Conn. Pub. Acts 156 ................................................................ 8 43 Pa. Stat. Ann. § 933.4 .................................................................. 8 Executive Law § 296 ......................................................................... 6 Labor Law § 190 ............................................................................................. 6 § 501 ......................................................................................... 3, 4 § 511 ................................................................................... passim § 527 ............................................................................................. 4 § 560 ....................................................................................... 4, 47 § 570 ............................................................................................. 4 § 861-a .......................................................................................... 7 § 862-b .......................................................................................... 7 § 861-c .......................................................................................... 7 Ch. 418, 2010 McKinney’s N.Y. Laws 1232 ................................... 23 Ch. 464, 1996 McKinney’s N.Y. Laws 937 ..................................... 23 Ch. 468, 1935 N.Y. Laws 1029 ......................................................... 3 x TABLE OF AUTHORITIES (cont’d) State Laws Page(s) Ch. 574, 2002 McKinney’s N.Y. Laws 12394 ................................. 23 Ch. 903, 1986 McKinney’s N.Y. Laws 2268 ................................... 23 Workers Compensation Law § 2 ...................................................... 5 Federal Statutes 29 U.S.C. § 152 ............................................................................................. 6 §§ 201-219 .................................................................................... 6 42 U.S.C. §§ 2000e to 2000e-17 .................................................................... 6 §§ 12101-12213 ............................................................................ 6 Miscellaneous Authorities Bill Jackets Assembly Mem. in Support, reprinted in Bill Jacket for Ch. 668 (1992) .................................................... 56 Governor’s Approval Mem., reprinted in Bill Jacket for Ch. 418 (2010) .................................................... 10 Ltr. from Dep’t of Labor to Counsel to the Governor (July 7, 2010), reprinted in Bill Jacket for Ch. 418 (2010) ......... 7 N.Y. State Regional Conference of Bricklayers & Allied Craftworkers Mem. in Support, reprinted in Bill Jacket for Ch. 418 ............................................. 7 Executive Orders N.J. Exec. Order No. 96 (Jan. 18, 2008) .......................................... 8 N.Y. Exec. Order No. 17 (Sept. 5, 2007), 29 N.Y. Reg. 109 ....... 8, 10 xi TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) Proposed Legislation H.R. 3408, 111th Cong. (2009) ......................................................... 9 H.R. 5107, 111th Cong. (2010) ......................................................... 9 H.R. 6111, 110th Cong. (2008) ......................................................... 9 S. 2044, 110th Cong. (2007) ............................................................. 9 S. 3648, 110th Cong. (2008) ............................................................. 9 Articles Alexander Colvin, Rethinking Bargaining Unit Determination: Labor Law and the Structure of Collective Representation, 15 Hofstra Lab. & Emp. L. J. 419 (1998) ........ 43 Brian Noonan, The Campaign Against Employee Misclassification, 82 n. Y. State Bar Journal 42 (Oct. 2010) ............................................................................ 5, 6, 8 Dante Ramos, Rage Against the Scheduling Machine, Boston Globe, Dec. 21, 2014, available at https://www.bostonglobe.com/opinion/2014/12/21/rage- against-scheduling- machine/UxNEG1QJhV6La9Dp6E5ReP/story.html .......... 43, 44 Joel M. Cohn and Richard J. Rabin, Analyzing the Latest Risks of Worker Misclassification, 247 N.Y. L. J., 12 (2012) ............................................................................................ 9 John Bruntz, The Employee/Independent Contractor Dischotomy: A Rose Is Not Always A Rose, 8 Hofstra Lab. L. J. 337 (1991) .......................................................................... 43 xii TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) Linda H. Donahue et. al., Cornell Univ. ILR School, The Cost of Worker Misclassification in New York State (2007), available at http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?a rticle=1009&context=reports ................................................. 5, 10 Marc Linder & Larry Norton, The Employee-as-Contractor Dodge, Philadelphia Inquirer, June 15, 1987, available at http://articles.philly.com/1987-06- 15/news/26182737_1_health-workers-farm-workers-form- 1099-misc ..................................................................................... 7 Marc Linder, What Is An Employee? Why It Does, But Should Not, Matter, 7 Law & Inequality 155 (1989) .......... 26, 34 Press Release, U.S. Dep’t of Labor, U.S. Labor Department Signs Agreements with N.Y. Labor Department and N.Y. Attorney General’s Office to Reduce Misclassification of Employees (Nov. 2013), available at http://www.dol.gov/opa/media/press/whd/WHD20132180. htm ............................................................................................. 10 Steven Greenhouse, A Push to Give Steadier Shifts to Part- Timers, N.Y. Times, July 15, 2014, available at http://www.nytimes.com/2014/07/16/business/a-push-to- give-steadier-shifts-to-part-timers.html?_r=0 .......................... 43 Steven Greenhouse, Dozens of Companies Underpay or Misreport Workers, State Says, N.Y. Times, Feb. 12, 2008, available at http://www.nytimes.com/2008/02/12/nyregion/12labor. html .............................................................................................. 8 xiii TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) Treatises Am. Jur. 2d – Federal Tax Guide to Legal Forms § 7.55 .............. 48 Restatement (Second) of Agency § 220 .......................................... 48 Websites Yoga Alliance, https://www.yogaalliance.org/ ................................ 14 Yoga Alliance, https://www.yogaalliance.org/Credentialing/GlossaryofTer ms#RYT ...................................................................................... 14 Yoga Vida, http://www.yogavida.com ............................................ 11 xiv PRELIMINARY STATEMENT Appellant Yoga Vida NYC, Inc. (Yoga Vida) hires instructors to teach regularly scheduled yoga classes at its two Manhattan locations. Yoga Vida acknowledges that instructors are integral to its business—indeed, without instructors, Yoga Vida could not provide the classes that are its core business product. It nonetheless classifies only some of its instructors as employees, and the rest as independent contractors who are therefore excluded from a range of labor protections and benefits, including unemployment benefits. Respondent New York State Commissioner of Labor (Commissioner) determined that all of Yoga Vida’s instructors are employees for purposes of unemployment insurance contributions, and the Unemployment Insurance Appeal Board (the “Board”) confirmed the Commissioner’s determination. The Appellate Division, Third Department affirmed that administrative decision, concluding that substantial evidence supported the Board’s factual finding of an employment relationship. This Court should affirm. It is undisputed that yoga instructors are an indispensable part of Yoga Vida’s business—they are the critical means by which Yoga Vida is able to offer yoga instruction at all. Yoga Vida exercises broad control over all of its instructors, not merely those it chooses to characterize as employees. Yoga Vida screens the instructors it hires to ensure they are properly trained and licensed and that their teaching is consistent with Yoga Vida’s business; it dictates the length and schedule of classes; it provides the facilities for the classes, and the equipment for students to use in the class; it determines the price of classes; and it collects the fee from students. Yoga Vida also monitors instructor performance; reviews student complaints about a class or an instructor; and can mandate that an instructor modify her class if it threatens student safety. Substantial evidence thus amply supports the Board’s finding that the Yoga Vida instructors in question are in fact employees. 2 QUESTION PRESENTED Does substantial evidence support the Board’s factual finding that Yoga Vida’s nonstaff instructors are employees, when Yoga Vida exercised substantial control over these instructors’ work, and that work constituted the performance of Yoga Vida’s core business? STATEMENT OF THE CASE A. The State’s Unemployment Insurance Law Eighty years ago, the New York Legislature determined that “[i]nvoluntary unemployment” and its resulting financial insecurity were a threat to the “health, welfare, and morale of the people of the . . . [S]tate.” See Labor Law § 501. The Legislature enacted the State’s unemployment compensation law, Ch. 468, 1935 N.Y. Laws 1029, to “alleviat[e] the adverse financial condition that frequently accompanies . . . the cessation of income from an employer,” Matter of Van Teslaar v. Levine, 35 N.Y.2d 311, 316 (1974). The State’s unemployment compensation law is a “remedial statute designed to protect the wage earner from the hazards of unemployment by providing money benefits to individuals 3 ‘unemployed through no fault of their own.’” Matter of Ferrara (Catherwood), 10 N.Y.2d 1, 8 (1961) (quoting Labor Law § 501); see also Matter of Machcinski (Ford Motor Co.), 277 A.D. 634, 639 (3d Dep’t 1951) (“Unemployment compensation statutes were enacted in various States during a period of distress and were designed to relieve the hardship caused by unemployment due to no fault of the employee”). Through compulsory contributions from a worker’s employer, see Labor Law § 570, the State maintains “financial reserves” for the benefit of those who become unemployed, id. § 501. In most instances, an employer must contribute to this unemployment fund on behalf of all employees once the employer pays $300 or more in wages in a calendar quarter. See id. § 560(1). To receive unemployment benefits, an individual must have earned at least $1,900 in income as an employee in one of the calendar quarters preceding the quarter in which he or she seeks benefits. Id. § 527(1). 4 B. The Pervasiveness of Employer Misclassification of Employees as Independent Contractors Unemployment benefits are available only to employees. See Labor Law § 511 (defining employment); see also Matter of Lambert (Staubach Retail Servs. Inc.), 18 A.D.3d 1049, 1049 (3d Dep’t 2005). Independent contractors cannot claim unemployment benefits, and those who hire independent contractors are not required to contribute to the State’s unemployment fund on their behalf. Matter of Lambert, 18 A.D.3d at 1049. Like unemployment benefits, a wide array of other labor protections are available only to employees. See Brian Noonan, The Campaign Against Employee Misclassification, 82 N.Y. State Bar Journal 42, 43 (Oct. 2010); Linda H. Donahue et. al., Cornell Univ. ILR School, The Cost of Worker Misclassification in New York State, 6 (2007). Employees, but not independent contractors, are covered by workers’ compensation,1 certain important federal 1 See Noonan, supra, at 42; N.Y. Workers Compensation Law § 2(4); Matter of Litts v. Risley Lumber Co., 224 N.Y. 321, 324-26 (1918). 5 and state antidiscrimination laws,2 and federal and state wage protections (such as minimum wage and overtime).3 Employees, but not independent contractors, can unionize.4 And employees, but not independent contractors, are entitled to receive family medical leave benefits or other customary benefits of employment, such as vacation, sick leave, retirement benefits, and heath care coverage. Noonan, supra, at 42. Employees thus receive a broad range of work-related legal and financial protections that independent contractors do not. Because these protections can be burdensome to employers, employers face powerful incentives to classify workers as 2 See 42 U.S.C. §§ 2000e to 2000e-17 (Title VII of the Civil Rights Act of 1964); 42 U.S.C. §§ 12101-12213 (Americans with Disabilities Act); Scott v. Mass. Mut. Life Ins. Co., 86 N.Y.2d 429, 433-34 (1995); N.Y. Executive Law § 296. 3 See 29 U.S.C. §§ 201-219 (Fair Labor Standards Act); N.Y. Labor Law § 190(2) (State Wage Law), Hernandez v. Chefs Diet Delivery, LLC, 81 A.D.3d 596, 597 (2d Dep’t 2011). 4 See 29 U.S.C. § 152(3) (defining statutory employees under Labor Management Relations Act); see also Corporate Express Delivery Sys. v. NLRB, 292 F.3d 777, 779 (D.C. Cir. 2002) (explaining that National Labor Relations Act protects the collective bargaining rights of employees, not independent contractors). 6 independent contractors—even when they are not—in order to avoid the costs associated with these labor protections. See Ltr. from Dep’t of Labor to Counsel to the Governor (July 7, 2010), reprinted in Bill Jacket for Ch. 418 (2010), at 20; N.Y. State Regional Conference of Bricklayers & Allied Craftworkers Mem. in Support, reprinted in Bill Jacket for Ch. 418, supra, at 24 (discussing employer incentive to misclassify in order to reduce labor costs). The misclassification of employees as independent contractors is an endemic problem. See, e.g., Marc Linder & Larry Norton, The Employee-as-Contractor Dodge, Philadelphia Inquirer, June 15, 1987. Indeed, in some industries, employee misclassification is so prevalent that the Legislature enacted legislation establishing a rebuttable presumption that workers in that industry are employees, not independent contractors, at least in certain circumstances. See Labor Law § 861-c (construction workers); § 861-a (legislative findings); § 862-b (drivers transporting commercial goods); see also Labor Law § 511(1)(b)(1- a), (2) (musicians and traveling salesmen); § 511(1)(b)(3) (professional models). 7 Misclassification persists despite repeated attempts by the Legislature to address this issue. In 2007, then-Governor Eliot Spitzer established the Joint Enforcement Task Force on Employee Misclassification in response to widespread misclassification by New York employers. See N.Y. Exec. Order No. 17 (Sept. 5, 2007), 29 N.Y. Reg. 109; see also Steven Greenhouse, Dozens of Companies Underpay or Misreport Workers, State Says, N.Y. Times, Feb. 12, 2008. In its first four months, the task force uncovered 2,078 misclassified employees, and $19 million in unreported wages. See Noonan, supra, at 43. And New York is not alone in battling employee misclassification. Several other states have also taken steps to hold employers responsible for deliberate misclassification of their employees in an attempt to avoid taxes or coverage for workers’ compensation or unemployment insurance. See, e.g., 2008 Conn. Pub. Acts 156 (establishing joint enforcement commission); N.J. Exec. Order No. 96 (Jan. 18, 2008) (establishing commission to address misclassification concerns); 43 Pa. Stat. Ann. § 933.4 (employee misclassification in construction). 8 Worker misclassification has also attracted the attention of the federal government. Congress has considered numerous legislative proposals aimed at stopping employee misclassification. See, e.g., S. 2044, 110th Cong. (2007); H.R. 6111, 110th Cong. (2008); S. 3648, 110th Cong. (2008); H.R. 5107, 111th Cong. (2010); H.R. 3408, 111th Cong. (2009). In 2007, for example, then- Senator Obama proposed legislation that would preclude employers from relying on industry practice as a justification for classifying workers as independent contractors. See S. 2044, 110th Cong. § 2(c) (2007). Federal agencies have also been active in policing employee misclassification. In 2010, the federal Department of Labor and the Internal Revenue Service began a joint initiative aimed at identifying businesses that misclassified employees as independent contractors. See Joel M. Cohn and Richard J. Rabin, Analyzing the Latest Risks of Worker Misclassification, 247 N.Y. L. J., 12 (2012). Since then, the Department has entered into agreements with twenty-two states, including New York, to share information and coordinate investigative efforts in order to protect 9 the rights of workers and lead to more effective enforcement of federal and state labor laws. See Press Release, U.S. Dep’t of Labor, U.S. Labor Department Signs Agreements with N.Y. Labor Department and N.Y. Attorney General’s Office to Reduce Misclassification of Employees (Nov. 2013). Employee misclassification “has a significant adverse impact on the residents, businesses and economy in New York.” Exec. Order No. 17, supra; see also Governor’s Approval Mem., reprinted in Bill Jacket for Ch. 418 (2010) at 5 (discussing “profoundly negative impact” of employee misclassification on workers, government, and law-abiding employers). Misclassification permits employers to gain an unfair competitive advantage by improperly lowering their labor costs. Id.; see also Donahue, supra, at 2, 7. It deprives the State of revenues to support vital government services, such as law enforcement and public schools. Exec. Order No. 17, supra; Donahue, supra, at 2, 11. And it hurts workers by denying them the protections and benefits of a wide array of employment and labor laws. Exec. Order No. 17, supra; Donahue, supra, at 2, 6. 10 C. Factual Background 1. Yoga Vida’s business Yoga Vida operates two yoga studios in Manhattan. (Appellant’s Appendix (“A.”) 50-51.) As Yoga Vida’s president acknowledged below, yoga classes are an “integral part” of Yoga Vida’s business (A. 108)—indeed, they are the principal product that Yoga Vida sells. Yoga Vida offers more than ninety yoga classes each week (A. 70), as well as retreats, single and multi-day workshops, teacher-training programs, and online practice videos.5 Yoga Vida offers classes in different yoga styles for a range of ability levels, with classes lasting between fifty-five minutes to one-hundred-and-twenty minutes.6 Yoga Vida has sole control over numerous elements of its classes. It determines the operating hours of its studios, and also 5 A list of Yoga Vida’s classes and workshops is available on its website. See Yoga Vida, http://www.yogavida.com (tab for “schedules + studios” and “programs + retreats”). 6 There are different types of yoga. Yoga Vida predominantly offers one style of yoga—vinyasa flow (see A. 111-112)—in different levels of difficulty (i.e., beginner, intermediate, and advanced) (A. 92). 11 creates the weekly schedule of classes for each location. (A. 72-73, 92-95.) Yoga Vida is responsible for determining how many classes will be offered each day; which type of classes will be offered in a particular day; the length of each class; when a particular class will be scheduled; and which instructor will teach each class. (A. 70-71, 92-94, 99, 102.) Yoga Vida is also responsible for promoting its classes by adding the weekly class schedule to its website, where students can access it. (A. 38, 72-73.) The schedule does not tend to fluctuate from week to week. (A. 74, 93.) If a class is popular at a certain time, Yoga Vida will continue offering it at that time without change. (A. 95-96.) Yoga Vida also determines the fee for its classes. It establishes the price for individual classes, multi-class packages, and studio memberships. (A. 99.) Students register and pay for a class through Yoga Vida’s website, or in person at the studio. (A. 99.) Yoga Vida collects the fee directly from students and tracks attendance in all of its classes. (A. 68, 99, 136.) Yoga Vida also provides students with all of the necessary equipment to participate in a class, such as mats, blocks, water, 12 and blankets. (A. 88.) It is also solely responsible for maintaining the studios where classes are taught. (A. 88.) 2. Yoga Vida’s instructors Yoga Vida’s president, Michael Patton, acknowledged that Yoga Vida could not “operate without yoga instructors.” (A. 55-56.) Despite the central importance of instructors to its core business (A. 108), Yoga Vida classifies only a portion of its instructors as employees (so-called “staff instructors”) and the rest (“nonstaff instructors”) as independent contractors (A. 115-116). Both types of instructors are responsible for teaching yoga to Yoga Vida’s clients. Staff instructors, however, have some additional responsibilities, such as attending meetings and performing managerial duties. (A. 54-55, 89.) Patton personally recruits both staff and nonstaff instructors for Yoga Vida. To select the instructors who will best carry out Yoga Vida’s core business, Patton evaluates prospective instructors by attending their classes (A. 57-58); verifies where 13 they trained (A. 75, 79-81); and confirms that they are registered as yoga teachers with Yoga Alliance (A. 79-81).7 An instructor’s compensation varies and is negotiated by Patton. (A. 58-59, 63, 124.) Typically, staff instructors are paid a flat fee for each class they teach. (A. 113.) Some nonstaff instructors also receive a flat fee per class; others receive a fixed hourly rate, an amount based on the number of students in the class, or a combination of these options. (A. 60, 62-63, 114, 124.) All instructors are paid by checks from Yoga Vida issued to them personally. (A. 63.) Staff instructors work for Yoga Vida on an open-ended basis. (See A. 127, 152.) Nonstaff instructors are formally employed under short-term contracts that are typically two to four weeks in 7 Yoga Alliance is a nonprofit group that maintains a list of yoga studios and teachers that have met their minimum standards for registration as licensed instructors. See Yoga Alliance, https://www.yogaalliance.org/ (link for “About Us”) (See also A. 82.) To become a licensed yoga teacher, an instructor must have completed a two- or five-hundred-hour training program at a studio that has satisfied the minimum requirements established by Yoga Alliance. See Yoga Alliance, https://www.yogaalliance.org/Credentialing/GlossaryofTerms#RYT 14 length. (A. 84, 86.) These contracts, however, are renewable, and Yoga Vida in fact renews many of these contracts when Patton determines that the nonstaff instructor’s work is advancing Yoga Vida’s business interests. (A. 83-86, 96, 101-102.) All instructors receive feedback and guidance from Patton on how to structure their classes. For staff instructors, Patton provides training and feedback to “help them invest in their business.” (A. 127.) Nonstaff instructors similarly can request assistance from Patton on “ways to improve” their classes. (A. 137- 138.) During a class, all instructors guide students through their practice with the use of verbal dialogue, personal assistance, and brief demonstrations of yoga postures. (A. 37.) Yoga Vida requires that all instructors (both staff and nonstaff) begin every class with a warm-up and end with savasana (the yoga equivalent of a cool down) (A. 37-38). In addition, Yoga Vida determines the “[g]eneral methodology” and “level of difficulty for each class.” (A. 37, 91-92.) Within these confines, every instructor is free to determine which sequence of postures to teach and how best to instruct students on those postures. (See A. 85; see also A. 37.) 15 Yoga Vida sets the teaching schedules for both staff and nonstaff instructors. (A. 70.) Staff instructors commit to teaching a predetermined number of classes each week. (A. 113.) Nonstaff instructors similarly agree to “teach a certain class at a certain time.” (A. 118-19; see also A. 39.) If an instructor is unable to teach her assigned class, she is responsible for finding a substitute, and for informing Yoga Vida that she is using a substitute. (A. 86-87, 104-105.) Yoga Vida requires that all substitutes be licensed. (A. 110-111.) If a nonstaff instructor is unable to find a substitute, Yoga Vida will find a substitute for the instructor rather than canceling the class. (A. 131-132.) Yoga Vida monitors the performance of nonstaff instructors to determine whether to extend their agreement (A. 38, 78, 88, 96), and to ensure that these instructors do not jeopardize the safety of Yoga Vida’s clients (A. 83-85, 107). Yoga Vida assesses a nonstaff instructor’s popularity—as determined by growth in the size of her class—when deciding whether to renew the instructor’s contract. (A. 96-97; see also A. 38, 83, 103.) Yoga Vida also monitors student feedback (A. 38, 84-86, 107), and will observe an 16 independent contractor while teaching if students complain about the class (A. 85). Yoga Vida will also ask its instructors to alter their approach when it determines that doing so is necessary to protect the safety of its students. (A. 38, 84-86, 89, 107.) D. Procedural Background 1. The Commissioner’s initial determination In 2010, the Commissioner issued a determination finding that Yoga Vida exercised “sufficient supervision, direction and control” over nonstaff instructors to establish an employment relationship. (A. 35-36.) Consequently, Yoga Vida was assessed for unpaid unemployment insurance contributions beginning in the fourth quarter of 2009. (A. 36.) Yoga Vida requested an administrative hearing. (A. 29-32.) Following a hearing where Patton was the sole witness (A. 42-156), the Administrative Law Judge (ALJ) overruled the Commissioner’s determination (A. 18-25). The ALJ concluded that Yoga Vida did not exercise sufficient direction and control over 17 nonstaff instructors to establish an employment relationship. (A. 22-24.) 2. The Unemployment Insurance Appeal Board’s determination The Commissioner appealed the ALJ’s decision to the Board. (A. 15, 17.) The Board reversed the ALJ’s decision, concluding that nonstaff instructors were employees of Yoga Vida. (A. 13-14.) To support its finding of an employment relationship, the Board found numerous indicia of control by Yoga Vida over the nonstaff instructors: (1) Yoga Vida established the fees for its classes; (2) Yoga Vida determined the length of classes and created the weekly class schedule; (3) Yoga Vida advertised the classes by publishing the class schedule on its website; (4) Yoga Vida provided the space where classes were taught, and the equipment for students to participate in a class; (5) Yoga Vida required that instructors notify it if they were using substitutes to teach classes; and (6) Yoga Vida evaluated instructors by observing their classes and monitoring student feedback. (A. 14.) Based on these findings of fact, the Board concluded that Yoga Vida “exercised sufficient 18 direction and control over the yoga instructors’ services to establish their status as employees.” (A. 14.) 3. The Appellate Division’s decision Yoga Vida appealed the Board’s determination to the Appellate Division, Third Department. (A. 10-12.) The Appellate Division affirmed. (A. 6-7.) Relying on Patton’s concession that instructors “were an integral part of Yoga Vida’s business,” and the Board’s findings demonstrating the extensive control exercised by Yoga Vida over its instructors, the court concluded that substantial evidence supported the Board’s determination of an employment relationship. (A. 7.) 19 ARGUMENT SUBSTANTIAL EVIDENCE SUPPORTS THE BOARD’S FACTUAL FINDING THAT ALL OF YOGA VIDA’S INSTRUCTORS ARE EMPLOYEES As the Appellate Division correctly held (A. 6-7), substantial evidence supports the Board’s determination that Yoga Vida’s nonstaff instructors are employees rather than independent contractors. Like the staff instructors, the nonstaff instructors carry out Yoga Vida’s core business of providing yoga classes to students. The nonstaff instructors teach regularly scheduled classes on Yoga Vida’s premises and work under contracts that are short-term but renewable. And to ensure that the nonstaff instructors advance Yoga Vida’s business interests and properly serve Yoga Vida’s clients, the company exercises substantial control over these instructors—including by setting their schedules, providing guidelines for their classes, and evaluating their teaching. This Court should affirm the Appellate Division’s decision holding that substantial evidence supports the Board’s factual finding of an employment relationship on the record of this case. Whether an employment relationship exists is a question of fact 20 for the Board. See Matter of Concourse Ophthalmology Assocs. (Roberts), 60 N.Y.2d 734, 736 (1983). No single factor is dispositive, and “all aspects of the arrangement must be examined to determine whether the degree of control and direction reserved to the employer establishes an employment relationship,” Matter of Villa Maria Inst. of Music (Ross), 54 N.Y.2d 691, 693 (1981). The Board’s factual finding “is binding on the courts” if it is supported by substantial evidence on the record as a whole. See Matter of Salamanca Nursing Home, Inc. (Roberts), 68 N.Y.2d 901, 903 (1986). Yoga Vida faces a heavy burden in seeking to overturn the Board’s determination. As the Appellate Division correctly recognized (A. 7), the Board’s finding of an employment relationship cannot be overturned for lack of substantial evidence simply because contrary evidence in the administrative record could support the opposite conclusion. See Matter of Empire State Towing & Recovery Ass’n (Comm’r of Labor), 15 N.Y.3d 433, 437 (2010); Matter of Villa Maria, 54 N.Y.2d at 693. “[T]he [B]oard was free to choose between” conflicting evidence, Matter of MNORX, Inc. (Ross), 46 N.Y.2d 985, 986 (1979), and “[w]hen 21 conflicting inferences are possible, the finding of the Board prevails,” Matter of Gordon v. N.Y. Life Ins. Co., 300 N.Y. 652, 654 (1950) (quotation marks omitted). In addition, it is well-settled that remedial legislation (such as the unemployment insurance law) should be construed liberally to effectuate its purpose. See Matter of Scanlan v. Buffalo Pub. Sch. Sys., 90 N.Y.2d 662, 676 (1997) (liberal interpretation); Matter of Ferrara, 10 N.Y.2d at 8 (recognizing that the State’s unemployment insurance law is a remedial statute “designed to protect the wage earner”). Because misclassifying employees as independent contractors deprives them of basic labor protections, close cases should be resolved in favor of recognizing an employment relationship in order to give full effect to the Legislature’s remedial purpose in enacting labor statutes like the unemployment insurance law. See Breaux & Daigle, Inc. v. United States, 900 F.2d 49, 52 (5th Cir. 1990) (explaining that “doubtful questions should be resolved in favor of employment in order to accomplish the remedial purposes of the legislation involved”). In such close cases, it is proper to leave to the Legislature the 22 question of whether its broad remedial policies should be withdrawn for some class of individuals—a question that the Legislature has repeatedly addressed in both limiting and expanding the definition of “employee” in various industries.8 Accordingly, the Court should affirm the Appellate Division’s ruling and conclude that substantial evidence supports the Board’s finding of an employment relationship here. 8 See, e.g., Labor Law § 511(1)(b)(1-b) (Ch. 418, 2010 McKinney’s N.Y. Laws 1232) (presumption that construction workers are employees for purposes of unemployment insurance and workers’ compensation); Labor Law § 511(21) (Ch. 574, 2002 McKinney’s N.Y. Laws 12394 (excluding licensed insurance agent or broker from definition of “employment”); Labor Law § 511(20), (20-b) (Ch. 464, 1996 McKinney’s N.Y. Laws 937) (excluding seasonal summer-camp employees from definition of employment); Labor Law § 511(1)(b)(1-a) (Ch. 903, 1986 McKinney’s N.Y. Laws 2268) (amending Labor Law § 511 to clarify that musicians are employees in many circumstances for purposes of unemployment insurance). 23 A. Nonstaff Instructors Are Integral to Yoga Vida’s Core Business of Providing Yoga Instruction. As a general matter, an employer-employee relationship exists where there is evidence that the employer exercised “control over the results produced . . . or over the means used to achieve the results.” See Matter of 12 Cornelia St. (Ross), 56 N.Y.2d 895, 897 (1982). Yoga Vida disputes the various indicia of control that the Appellate Division and the Board found here. As we explain below, those findings were supported by substantial evidence. Moreover, they are strengthened and affirmed by a critical feature of Yoga Vida’s relationship with nonstaff instructors: its use of these instructors to carry out Yoga Vida’s main business. As the Appellate Division recognized (A. 7), that factor is central to the analysis of this case, and accordingly we begin with it here. Yoga Vida’s core business is yoga instruction. (A. 52.) Instructors are indispensable to Yoga Vida’s ability to operate that business. Indeed, Patton acknowledged that without instructors, Yoga Vida could not offer yoga classes—the principal product that it sells to clients. (See A. 55-56, 108.) There is thus no dispute that 24 nonstaff instructors, like staff instructors, “were an integral part of Yoga Vida’s business,” as the Appellate Division found. (A. 7.) The Appellate Division correctly held that this factor weighed heavily in favor of classifying nonstaff instructors as employees. This is true for several reasons. For one thing, as a practical matter businesses ordinarily exercise substantial control over the workers that are responsible for the indispensable elements of their operations; put another way, they are highly unlikely to cede control of those functions that are most critical to their corporate identity, profitability, and long-term success. Yoga Vida is no exception. As explained further below, see infra Point B, Yoga Vida does not give nonstaff instructors free reign to use Yoga Vida’s physical space as they see fit, but rather requires those instructors to conform their schedules, recruiting, and significant elements of their teaching to Yoga Vida’s priorities, management, and corporate brand. Thus, although nonstaff instructors have somewhat more flexibility than staff instructors, they remain subject to Yoga Vida’s meaningful control. 25 More fundamentally, a worker who is critical to a business’s performance of its core function bears little resemblance to the classic conception of an independent contractor. As commonly understood, an independent contractor is in business for herself, able to manage her own affairs and take advantage of “the opportunity for profit from sound management.” United States v. Silk, 331 U.S. 704, 719 (1947). An independent contractor typically is retained to apply her specialized expertise to a problem that the hirer cannot address on his own: for example, a plumber that a homeowner hires to fix a broken pipe. And those who retain such an independent contractor often have limited ability to control the contractor because they lack the expertise, equipment, and skills to dictate how the task should be performed. See Marc Linder, What Is An Employee? Why It Does, But Should Not, Matter, 7 Law & Inequality 155, 172 (1989). By contrast, an individual who helps carry out a business’s core operations is not a “specialist[ ] called in to solve a special problem,” as an independent contractor would be, but is instead a worker who performs the “essential, everyday” tasks required by 26 the business. McLaughlin v. Seafood, Inc., 861 F.2d 450, 452 (5th Cir. 1988), modified, 867 F.2d 875 (5th Cir. 1989). The business that retains such a worker typically uses her to provide services to others, namely the business’s own clients. And by using the worker in this way, the business is able to capture some (even most) of the value of the worker’s labor, retaining a significant portion of the profit from what the business’s clients pay in exchange for the worker’s services. A worker in the latter category is not independent in the sense that she runs her own business, because she is carrying out her employer’s business. And she is not independent in the sense of being free from her employer’s control, because as a practical matter a business will likely exercise the greatest control over those who are responsible for carrying out its core functions. Such a worker is essentially acting as an extension or representative of the business that retains her—much in the way that an employee would. “Where the work done, in its essence, follows the usual path of an employee, putting on an ‘independent contractor’ label” should not result in the denial of protections afforded to all 27 employees. Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947). For these reasons, courts throughout the country have consistently recognized that a worker’s performance of a business’s core function is a compelling indicator of an employment relationship.9 In Alexander v. FedEx Ground Package System, for example, the Ninth Circuit rejected FedEx’s attempt 9 Both state and federal courts have routinely considered whether a worker’s services are integral to the business in determining whether an employment relationship exists. See, e.g., Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1319 (11th Cir. 2013); Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 305, 309 (4th Cir. 2006); Eisenberg v. Advance Relocation & Storage, Inc., 237 F.3d 111, 119 (2d Cir. 2000); Matter of Williams (Comm’r of Labor), 268 A.D.2d 621, 622 (3d Dep’t 2000); Matter of Barone (Comm’r of Labor), 257 A.D.2d 950, 951 (3d Dep’t 1999); Baker v. Flint Eng’g & Const. Co., 137 F.3d 1436, 1443 (10th Cir. 1998); Martin v. Selker Bros., Inc., 949 F.2d 1286, 1295-96 (3d Cir. 1991); Breaux, 900 F.2d at 53; Brock v. Superior Care, Inc., 840 F.2d 1054, 1061 (2d Cir. 1988); Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1537- 38 (7th Cir. 1987). Indeed, the integral nature of a worker’s services is an element of every test used to assess the existence of an employment relationship. See, e.g., Nationwide Mut. Ins. v. Darden, 503 U.S. 318, 324 (1992) (common law test); Lambersten v. Utah Dep’t of Corr., 79 F.3d 1024, 1028 (10th Cir. 1996) (hybrid test); Carpet Remnant Warehouse, Inc. v. N.J. Dep’t of Labor, 125 N.J. 567, 572-73 (1991) (ABC test); Lauritzen, 835 F.2d at 1534-35 (economic realities test). 28 to classify its delivery drivers as independent contractors rather than employees. 765 F.3d 981, 997 (9th Cir. 2014). FedEx’s arguments about lack of control were unavailing, the Ninth Circuit held, in large part because “the work performed by the drivers is wholly integrated into FedEx’s operation” and “a central part of its business”: among other things, the drivers’ work satisfied “FedEx’s business needs” and served “FedEx’s customers, not the drivers’ customers.”10 Id. at 984, 995 (quotation marks 10 On similar reasoning, numerous other courts have found an employment relationship where the worker rendered a service to the business that furthered the core function of that business. See, e.g., Silk, 331 U.S. at 706, 716-18 (workers hired to unload coal by business that operated coal yard and sells coal were employees); Avis Rent A Car Sys., Inc. v. United States, 503 F.2d 423, 428 (2d Cir. 1974) (persons hired by Avis to move rental cars between Avis locations were employees); Quinteros v. Sparkle Cleaning, Inc., 532 F. Supp. 2d 762, 771 (D. Md. 2008) (janitorial workers for movie theater were employees of janitorial services company); Matter of Encore Music Lessons LLC (Comm’r of Labor), 2015 N.Y. Slip Op. 04553, at *1 (3d Dep’t 2015) (music teachers were employees of business that provided music instruction to students seeking lessons); Matter of Nance (NYP Holdings Inc.), 117 A.D.3d 1294, 1295-96 (3d Dep’t 2014) (photojournalist employee of newspaper); Matter of Goddard (Summit Health, Inc.), 118 A.D.3d 1200, 1201 (3d Dep’t 2014) (medical assistant employee of health and wellness company that provided health screenings at corporate clients); Johnson v. 29 (continued on next page) omitted); see also Rutherford Food Corp., 331 U.S. at 729 (concluding that beef boners were employees of slaughterhouse in part because their services were “part of the integrated unit of production” for the business). The same analysis applies here. Although Yoga Vida classifies only some of its instructors as employees, in practice all of them serve the same practical function of performing the yoga teaching services that constitute Yoga Vida’s “trade or business.” Silk, 331 U.S. at 718. Here, all instructors provide direct service to students who are Yoga Vida’s clients, not the instructors’ clients. And all of them form parts of an integrated enterprise from which Berkofsky-Barret Prods., 211 Cal. App. 3d 1067, 1073 (1989) (actor was employee of production company that produced commercials); Cal. Emp’t Comm’n v. L.A. Down Town Shopping News Corp., 24 Cal. 2d 421 (1944) (paper delivery boys employees of publication); Matter of Scatola (Bronx Home News Publ’g Co.), 282 N.Y. 689 (1940) (persons delivering newspaper were employees of newspaper publisher); see also Awuah v. Coverall N. Am., 707 F. Supp. 2d 80, 84 (D. Mass. 2010) (despite “franchisee” label workers were employees because they did not perform services “outside the usual course” of employer’s business); Rainbow Development, LLC v. Mass. Dep’t of Industrial Accidents, 2005 WL 3543770, at *3 (Superior Court Mass. Nov. 17, 2005) (finding employment relationship where employer’s only business was to provide its customers “with the services that these [workers] perform”). 30 students can receive yoga instruction by registering for classes on a single website run by Yoga Vida, showing up at two locations owned by Yoga Vida, and paying a single entity: Yoga Vida. Yoga Vida is thus not a mere facilitator or clearinghouse for independent instructors searching for students of their own. Cf. Matter of John Lack Assocs., LLC (Comm’r of Labor), 112 A.D.3d 1042, 1043-44 (3d Dep’t 2013) (concluding that waiters were not employees of agency that merely facilitated placement of waiters with clients). Yoga Vida is, itself, in the business of yoga instruction. (See A. 52; see also A. 55-56.) And it uses instructors— staff and nonstaff alike—to carry out its business. The critical role that those instructors play in Yoga Vida’s ability to perform its core business strongly supports the Board’s finding of an employer-employee relationship. 31 B. Yoga Vida Exercises Broad Control and Supervision Over Nonstaff Instructors. Substantial evidence also supports the Board’s finding that Yoga Vida meaningfully controlled the nonstaff instructors that it hired to further its own business. An employer-employee relationship exists where there is evidence that the employer exercised “control over the results produced or over the means used to achieve the results.” See Matter of 12 Cornelia St., 56 N.Y.2d at 897. Where the details of the work performed are difficult to control—such as where the work involves the services of a professional or are highly personalized by necessity or practice—an employment relationship may be established by the less demanding standard of “over-all control,” which requires only that a hiring party have “control over important aspects of the services performed other than results or means.” See Matter of Concourse Ophthalmology, 60 N.Y.2d at 736. Teachers have historically been deemed to provide services that should not be managed by command-and-control direction over the results or means. Students vary widely in their abilities, and teachers—to be effective—must tailor their methods to the 32 particular students in a class. This is true for yoga instructors as well as for teachers of academic subjects: a yoga instructor’s training, the particular style of yoga being taught, and the level of experience of the students in the class necessarily guide her instruction. (See A. 85, 89 (explaining that teacher’s training and experience determines how class is taught); see also A. 78, 112.) Consequently, courts regularly apply the less demanding overall- control test to determine if an employment relationship exists when a teacher is rendering the services. See, e.g., Matter of Martin (Crest-Mainstream, Inc.), 259 A.D.2d 824 (3d Dep’t 1999) (speech pathology teacher); Matter of Mydland (N. Shore Equestrian Ctr.), 221 A.D.2d 748 (3d Dep’t 1995) (horse riding instructor); Matter of Clorfeine (N.Y. Open Ctr.), 187 A.D.2d 840 (3d Dep’t 1992) (teachers). Control is the critical trigger for many labor protections, including the benefits of the unemployment insurance law, because it is precisely the workers who are subject to the control of an employer who are unable to protect themselves in the labor market and are therefore in need of statutory protection. An 33 employee must submit to the demands and conditions imposed by an employer, see Linder, supra, at 179, and is thus dependent “upon the conditions of his employment as the company fixes them,” Lehigh Valley Coal Co. v. Yensavage, 218 F. 547, 552-53 (2d Cir. 1914). Moreover, “disparate degrees of bargaining power” often place employees at a disadvantage compared to employers. Linder, supra, at 177. Protective labor legislation, such as antidiscrimination laws, unemployment compensation insurance, and workers’ compensation, are designed to avoid the “unacceptable exploitation” of employees in this otherwise unbalanced relationship. Id. By contrast, legislatures have often regarded independent contractors as having enough skill, capital, and autonomy to protect themselves in the market for their services. Linder, supra, at 162-63. Here, as the Appellate Division correctly recognized, substantial evidence shows that Yoga Vida exercises broad control over every facet of yoga instruction at its two locations—and unsurprisingly so, given its strong interest in promoting and growing its own business and protecting its own brand. Yoga Vida 34 exerts substantial control over its yoga classes by monitoring all of its instructors; hiring only properly trained and licensed teachers; providing them feedback on their class instruction; dictating the class schedule; and supplying the equipment and facilities necessary for the classes. Moreover, for all of its instructors, Yoga Vida controls all administrative aspects associated with the classes. It establishes the price for each class; collects the fees from students; monitors attendance; and publicizes the classes on its website. In all meaningful respects, Yoga Vida ensures that students receive adequate instruction and thus remain clients of Yoga Vida. Class Schedule & Instructor Hours. As the Board found (A. 14), a business’s control over a worker’s hours or schedule is consistent with an employment relationship. See Matter of Concourse Ophthalmology, 60 N.Y.2d at 736-37 (hiring party scheduled appointments for worker and set regular hours); Matter of Salamanca Nursing Home, 68 N.Y.2d at 903 (employer established number of hours); Matter of Di Martino (Buffalo Courier Express Co.), 59 N.Y.2d 638 (1983) (affirming Board’s finding of an employment relationship based in part on employer 35 dictating schedule for deliveries); see also Matter of Viig (Hello World Language Ctr.), 66 A.D.3d 1064, 1065 (3d Dep’t 2009) (relying on employer’s establishment of class schedule). Here, there is ample evidence that Yoga Vida exercises such control. Yoga Vida determines the operating hours of its studios; the number of classes offered each day; the type of classes that will be offered; which instructors will teach each day, based on their availability and experience; and the length of each class.11 (A. 72- 73, 92-95, 102.) It hired instructors to teach a certain style of yoga at a predetermined time, and an instructor could not unilaterally change the class time, yoga style, or level of difficulty of the class. (A. 118-119.) Cf. Matter of Wilson Sullivan Co. (Miller), 289 N.Y. 110, 113 (1942) (independent contractors had “no specific hours, no definite routine to follow” each day). As a result of Yoga Vida’s 11 There is no merit to Yoga Vida’s argument that it does not dictate the length of its classes. Br. for Appellant (“Br.”) at 18. Patton testified that the studio determines the length of classes and the time each class is scheduled, to create a weekly schedule that attracts the greatest number of students to the studios. (See A. 70-71, 92-93, 95, 102.) 36 control over these factors, it substantially defines and constrains the work schedule of all of its instructors. Even instructors who teach only a few hours each week may still be employees, where, as here, Yoga Vida dictates when they can work and exercises control over how their services are rendered.12 See, e.g., Brock, 840 F.2d at 1060-61 (explaining that “transient” nurses that worked for several employers and for each only a small percentage of time were nonetheless employees); Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1053-54 (5th Cir. 1987) (seasonal workers may nonetheless be employees). The hiring party’s exercise of control over the work performed is more important than the number of hours worked or the length of the relationship in determining whether an employment relationship exists. See, e.g., Rivera v. Hospital Universitario, 762 F. Supp. 15, 17-18 (D. P.R. 1991) (concluding that attending physician was an 12 Indeed, the Legislature established a low threshold (only $300 in wages in a calendar quarter) to trigger an employer’s obligation to make unemployment insurance contributions, suggesting that unemployment benefits are not limited to long- term employment relationships. See Labor Law § 560(1). 37 employee even though he worked part time); Angelotti v. Walt Disney Co., 192 Cal. App. 4th 1394, 1405 (2011) (finding that stunt performer was employee of production company even though contract lasted one week). In this regard, Yoga Vida’s instructors are akin to other employees, like adjunct professors, who may be hired on a class-by- class basis, or only for a single class, but are employees because of the control exercised by the school over their services. See, e.g., Schramm v. C.I.R., T.C. Memo. 2011-212, 2011 WL 3835670, at *1, 3 (T.C.M. (CCH) 2011) (adjunct professor employee of university because school dictated textbook to use, subjects to cover in class, and duration of course); Potter v. C.I.R., T.C. Memo. 1994-356, 1994 WL 388984, at *1 (T.C.M. (CCH) 1994) (“gypsy” lecturer an employee where school exercised control over services even though he was hired on a class-by-class basis and taught only two classes). In any event, the evidence before the Board here does not show that the nonstaff instructors were retained only for single classes or special events. To the contrary, the evidence shows that Yoga Vida had ongoing relationships with the nonstaff instructors. The contracts 38 they signed were renewable, and Patton testified extensively about the factors he regularly considered in deciding whether to continue Yoga Vida’s relationship with a nonstaff instructor. Further evidence of an employment relationship is the consistent schedule worked by all of Yoga Vida’s instructors. As Patton testified (A. 74, 93), the class schedule for the studio did not fluctuate from week to week. See Matter of Concourse Ophthalmology, 60 N.Y.2d at 736 (noting that “hours worked are for the most part regularly scheduled rather than occasional or sporadic”). Contrary to Yoga Vida’s argument (Br. at 10), instructors are not able to teach “at their own convenience” because an instructor’s hours are restricted by the class schedule unilaterally imposed by Yoga Vida.13 Cf. Matter of Empire State 13 Matter of Cassaro (Horton), 89 A.D.3d 1288 (3d Dep’t 2011), which Yoga Vida cites (Br. at 10), is inapposite. In that case, the independent contractor—a truck driver hired to transport scrap metal and waste tires for a trucking company— had the ability to determine “the amount of time he took to transport the loads” to the scrap yard. 89 A.D.3d at 1289. By contrast, that type of discretion does not exist here because Yoga Vida determined the schedule of classes and also established the length for all classes. 39 Towing, 15 N.Y.3d at 436 (finding independent contractor status based partly on lawyer’s freedom “to set his own schedule”); Matter of Ted Is Back Corp. (Roberts), 64 N.Y.2d 725, 726 (1984) (ability of salespeople to work “at their own convenience” supported finding of no employment relationship). Yoga Vida argues that a nonstaff instructor’s ability to “employ substitutes for any reason weighs heavily in favor of independent contractor status.” Br. at 10. But an instructor’s ability to use a substitute is not conclusive evidence that she teaches at her own convenience (Br. at 10). See, e.g., Matter of Piano Sch. of N.Y. City (Comm’r of Labor), 71 A.D.3d 1358, 1359 (3d Dep’t 2010) (piano instructor found to be employee despite ability to use a substitute to teach class). Here, the evidence before the Board shows that the availability of substitute teachers did not “counteract the extensive control” Yoga Vida exercised over its nonstaff instructors. Alexander, 765 F.3d at 990 (explaining that some freedom in how work is performed does not negate control exercised by employer). 40 Instructors (including nonstaff instructors) are not free to use any substitutes that they wish. To the contrary, instructors must inform Yoga Vida before they use a substitute (A. 86-87, 104- 105), and Patton considers an instructor’s repeated use of a substitute in his decision to renew an instructor’s contract.14 (A. 105-106.) Yoga Vida also monitors the use of substitutes to ensure that the substitute (like the instructor) is properly licensed. (A. 110-111.) Moreover, Yoga Vida, not the instructor, directly informs students that the class will be taught by a substitute. (A. 38, 72- 73.) Finally, if an instructor is unable to find a substitute, Yoga Vida does not cancel the class; it instead finds a substitute for the instructor. (A. 38, 132.) Yoga Vida’s close supervision over the substitution of instructors is yet another illustration of its careful 14 Significantly, unlike the workers in Barak v. Chen (Br. at 10), an instructor could not refuse to teach a class she was scheduled to teach without jeopardizing her continued relationship with Yoga Vida. See Barak v. Chen, 87 A.D.3d 955, 957 (2d Dep’t 2011) (explaining that drivers for limousine service had “discretion to reject dispatches”). Patton testified that instructors were hired to teach a particular class (A. 119), and he evaluated their use of substitutes in deciding whether to renew their contract (A. 105-106). 41 oversight of its core business: its substitute policy ensures that the business continues to operate, and that students receive the service they paid Yoga Vida to receive, even when the scheduled instructor cannot satisfy her obligation to teach a class. In any event, even if nonstaff instructors had some flexibility to set their own schedules (which they did not), some flexibility would not preclude the Board’s finding of an employment relationship where, as here, numerous other indicia of employment are present. See, e.g., Breaux, 900 F.2d at 52 (affirming finding of employment relationship even though workers were “entitled to work whenever they wish, to come and go as they please, to take breaks whenever they desire, to refuse to do any job, and to work for competitors”); Gen. Inv. Corp. v. United States, 823 F.2d 337, 342 (9th Cir. 1987) (“Mere fact that the workers set their own hours and determined when to take breaks did not make them independent contractors”); Matter of Polinsky (Hartnett), 163 A.D.2d 684, 685 (3d Dep’t 1990) (employment relationship despite ability of workers to “select[ ] the days and hours they would be available”). 42 It would be particularly inappropriate to give totemic status to a flexible work schedule given recent trends in employment practices. The traditional full-time job—in which a worker could count on a reliable forty-hour work week year round—is on the wane. See Alexander Colvin, Rethinking Bargaining Unit Determination: Labor Law and the Structure of Collective Representation, 15 Hofstra Lab. & Emp. L. J. 419, 430-31 (1998). Many employers have moved toward a more flexible staffing system in order to save money on labor costs and to better accommodate fluctuating consumer demand. See John Bruntz, The Employee/Independent Contractor Dischotomy: A Rose Is Not Always A Rose, 8 Hofstra Lab. L. J. 337, 340-41 (1991); Dante Ramos, Rage Against the Scheduling Machine, Boston Globe, Dec. 21, 2014. There is a growing practice of employers requiring employees to submit to on-call work schedules of only one or two days a week, with unpredictable hours and little advance notice. See Steven Greenhouse, A Push to Give Steadier Shifts to Part- Timers, N.Y. Times, July 15, 2014. Employers in the retail industry, for instance, are implementing a “just-in-time 43 scheduling system” where employees are required to call in shortly before a planned shift to confirm whether their services are needed, and, as a result, employees are being told they must work a day or less before a scheduled shift. See Ramos, supra. Because of this fundamental shift in the workforce, which has affected broad swathes of low-income Americans, this Court should not automatically reject the classification of an employment relationship even when a worker does not commit to a single employer, works less than a forty-hour work week, or works irregular or unpredictable hours. The evolving nature of work arrangements requires a more nuanced examination of a worker’s relationship with an employer’s business. Hiring and Supervising Instructors. To ensure the success of its studios, Yoga Vida recruits trained and licensed instructors to teach classes that are popular with students. (See A. 79-82, 96.) Yoga Vida’s president personally attends an instructor’s class to assess her teaching method. (A. 57, 75.) And Yoga Vida also ensures that substitute instructors are trained and licensed. (A. 110-111.) This oversight over the quality of instructors supports an 44 employment relationship. See Matter of Prof’l Career Ctr. (Comm’r of Labor), 105 A.D.3d 1219, 1220 (3d Dep’t 2013); see also Matter of Viig, 66 A.D.3d at 1065 (employer’s ability to review and evaluate worker’s services supported finding of employment relationship). In addition to screening instructors at the outset, Yoga Vida continuously evaluates its instructors, as the Board found. (A. 14; see also A. 78, 85, 96.) Although an instructor has flexibility in structuring her class (A. 89), Yoga Vida confirms that instructors are not jeopardizing the safety of the business’s clients (the students), and Patton retains the power to ask an instructor to modify her class if students are at risk of being injured (see A. 83- 85, 107). Moreover, in determining whether to keep an instructor at the end of his or her renewable, short-term contract, Yoga Vida evaluates (1) the instructor’s popularity with students; (2) any complaints from students; and (3) the instructor’s use of substitutes. (A. 83, 85, 107 (student complaints), 88, 105-106 (use of substitutes), 90 (class growth), 96 (popularity).) Such ongoing control and oversight of teacher quality is further evidence of an employment relationship. See Matter of Salamanca Nursing 45 Home, 68 N.Y.2d at 903 (facility retained ability to evaluate nursing home professionals, supporting finding of employment relationship); Mater of Cohen (Blinder, Robinson & Co.), 67 N.Y.2d 683, 684 (1986) (affirming employment relationship finding based, in part, on hiring party’s ability to discharge worker for “low sales production”); see also Matter of Columbia Artists Mgmt. (Comm’r of Labor), 109 A.D.3d 1055, 1057 (3d Dep’t 2013) (employer ability to ensure “artistic quality” by retaining ability to ask for change in performance supported finding of employment relationship). Facilities & Equipment. Control by a hiring party over the facilities where the services are performed is indicative of an employment relationship.15 Matter of Concourse Ophthalmology, 60 N.Y.2d at 737 (finding employment relationship based in part 15 Control over facilities and equipment is a significant factor that is considered by federal courts nationwide as evidence of an employment relationship. See Avis Rent A Car, 503 F.2d at 430 (car shuttlers considered employees in part because they did not invest in equipment necessary for work and did not incur costs associated with work performed); see also Peno Trucking, Inc. v. Comm’r of Internal Revenue, 296 F. App’x 449, 458 (6th Cir. 2008); Weber v. Comm’r of Internal Revenue, 60 F.3d 1104, 1112 (4th Cir. 1995) (per curiam); Breaux, 900 F.2d at 52; Gen. Inv. Corp., 823 F.2d at 342. 46 on control by hiring party over premises and equipment necessary for services of worker); Matter of Goldstein (Roberts), 61 N.Y.2d 937, 938 (1984) (same); Matter of Cohen, 67 N.Y.2d at 684 (same); see also Matter of Spinnell (Comm’r of Labor), 300 A.D.2d 770, 771 (2002) (employment relationship based, in part, on finding that work was performed in employer’s office using his equipment); Matter of Prof’l Career Ctr., 105 A.D.3d at 1220 (same); Matter of Lambert, 18 A.D.3d at 1050 (same); Matter of Polinsky, 163 A.D.2d at 684 (same). Here, Yoga Vida maintains the studio space where the instructors teach, and it provides the equipment (mats, blocks, blankets) necessary for students to participate in classes. (A. 37 (¶¶ 4, 5), 88.) As a result, none of Yoga Vida’s instructors incur any of the costs associated with teaching yoga. Yoga Vida claims that such control is merely incidental. Br. at 19-20. But this argument misses the point. As an initial matter, “[a]ll aspects of the arrangement” between a worker and a hiring party must be examined. See Matter of Villa Maria, 54 N.Y.2d at 692. But more significantly, the facilities and equipment provided by Yoga Vida are indispensable to an instructor’s ability to 47 perform the contracted-for service. A worker who is required to supply the materials and equipment necessary to perform his services is more akin to an independent contractor than an employee because of the worker’s independence from the business for the instrumentalities necessary to render his services. See Restatement (Second) of Agency § 220(2)(e) (stating that whether the worker “supplies the instrumentalities, tools, and the place of work” is a factor indicative of an independent contractor); Robb v. Unites States, 80 F.3d 884, 894 (4th Cir. 1996) (concluding that physician was independent contractor in part because he was required to provide all “‘equipment, material, and supplies’ to perform his services”). By contrast, when, as here, a business provides the facilities and equipment necessary for a worker to do her job, the worker’s dependence on the business is indicative of an employment relationship. See Am. Jur. 2d – Federal Tax Guide to Legal Forms § 7.55. Class Fees, Attendance, Revenues & Instructor Feedback. Yoga Vida is the interface between its clients (the students) and its instructors. Students do not engage directly with instructors 48 for any meaningful financial or administrative task. Thus, Yoga Vida establishes the fees for its classes (A. 99); collects payment from students (A. 68-69, 99); monitors attendance and revenue for all of its classes (A. 123, 135-136); and accepts student complaints about a class or an instructor (A. 83-85). Yoga Vida ignores these factors in its brief. But they demonstrate that the instructors are performing a service in furtherance of Yoga Vida’s business (not their own) because Yoga Vida (not an instructor) controls vital elements of the actual business of yoga instruction, such as price, cash management, and client satisfaction. See Matter of Concourse Ophthalmology, 60 N.Y.2d at 736-37 (relying on fact that employer fixed the fees charged to patients for the services performed and maintained patient records); Matter of Goldstein, 61 N.Y.2d at 938 (corporation set patient fees and billed patients directly); Matter of Charles A. Field Delivery Serv. (Roberts), 66 N.Y.2d 516, 521 (1985) (employer collected complaints about newspaper delivery persons); see also Matter of Prof’l Career Ctr., 105 A.D.3d at 1220 (relying on employer’s ability to collect student tuition and oversee quality of instructors based on student 49 evaluations); Brock, 840 F.2d at 1060 (employer supervised nurses by reviewing “patient care notes”). Recruiting Students. Yoga Vida also makes considerable efforts to attract students to its studios—another indication that Yoga Vida considers the students its own clients, rather than the clients of its instructors. (A. 38.) Yoga Vida generates clients in three significant ways: it advertises classes on its website; it posts the class schedule online (A. 73); and it develops a weekly schedule designed to attract the greatest number of students (A. 92-93). Yoga Vida’s substantial role in attracting students to its business is further evidence of an employment relationship. Compare Matter of Goldstein, 61 N.Y.2d at 938 (patients were referred to business (the employer) and assigned to individual physical therapists); Matter of Concourse Ophthalmology, 60 N.Y.2d at 736 (patients belonged to business) with Matter of 12 Cornelia, 56 N.Y.2d at 897 (finding no employment relationship based in part on finding that salespersons (and not real estate business) were responsible for generating sales leads). See also Matter of Prof’l Career Ctr., 105 A.D.3d at 1220 (basing 50 employment relationship, in part, on employer’s role in recruiting students to career center). Yoga Vida asserts that it does not solicit students for nonstaff instructors’ classes (Br. at 19), but the evidence does not support this assertion. In its written response to the Department of Labor, Yoga Vida admits that it recruits students, without distinguishing between staff and nonstaff instructors’ classes. (A. 38.) Moreover, Patton testified that Yoga Vida does not “advertise at all for individual classes”; instead, Yoga Vida’s public outreach appears to consist of publishing each studio’s weekly class schedule available on its website. (A. 91.) That class schedule does not exclude nonstaff instructors’ classes. In other words, the record here shows that Yoga Vida’s promotion of its business and its brand encompassed both staff and nonstaff instructors. To be sure, Yoga Vida does not preclude nonstaff instructors from promoting their individual classes as well. (There is also no indication that Yoga Vida prevents staff instructors from doing so.) The critical point here is that Yoga Vida does not leave public outreach solely to its instructors. Yoga Vida’s involvement in 51 recruiting students and promoting its core business of yoga instruction—for all classes—indicates that it is an employer. C. The Appellate Division Did Not Ignore Factors Indicative of a Lack of Control. Yoga Vida emphasizes several factors that it argues support a finding that its nonstaff instructors are independent contractors: (1) nonstaff instructors can teach at other studios (Br. at 11-13); (2) they do not receive fringe benefits, and Yoga Vida does not pay employment taxes on their behalf (Br. at 13-14, 16-17); and (3) they are not paid a fixed salary (Br. at 14-16). Even if all of these factors were true, they would not require a reversal of the the Board’s determination, since it is well settled that the Board’s factual finding of an employment relationship may be supported by substantial evidence even where facts in the record could support a contrary conclusion. See Matter of Viig, 66 A.D.3d at 1065. At best, Yoga Vida has identified evidence in the administrative record that could point to a contrary conclusion. But the Board is entitled to balance that competing evidence, and its determination warrants judicial deference. 52 In any event, as discussed below, the factors Yoga Vida emphasizes are not inconsistent with the Board’s finding of an employment relationship. Outside Employment. Yoga Vida asserts that its “strongest argument in favor of independent contractor status” is the purported fact that nonstaff instructors can “work for Yoga Vida’s direct competitors without restriction or consequence” and can “openly and directly advertise” to Yoga Vida students “that he or she is able to work for a direct competitor.” Br. at 11. As an initial matter, this argument is based on factual assumptions that are not borne out by the record. Nonstaff instructors are not completely free to advertise their non-Yoga Vida business; Patton testified that he has previously found such advertisement of outside employment “completely out of line” if it reaches “multiple students” and appears to be “directly competing with” the services that the nonstaff instructor is providing for Yoga Vida at the time. (A. 101-102.) Moreover, Patton acknowledged that a nonstaff instructor’s advertisement of outside work might lead to the termination of his or her ongoing relationship with Yoga Vida. (A. 102.) 53 Similarly, although it is true that nonstaff instructors are free to work for other yoga studios, the same is true of the staff instructors who are indisputably Yoga Vida’s employees. Patton testified that he places extremely short-range geographical restrictions on some staff instructors’ outside employment, but that even under those restrictions they remain “able to teach within ten blocks, five blocks, three blocks” of Yoga Vida. (A. 116.) Thus, far from being dispositive, the ability of nonstaff instructors to work elsewhere does not even distinguish them from Yoga Vida’s own employees. In any event, an instructor’s ability to teach at other studios does not preclude a finding of an employment relationship. Br. at 11-13. In Matter of Goldstein, this Court upheld the Board’s determination that physical therapists were employees despite their ability “to treat their own patients” outside of the employer’s practice. 61 N.Y.2d at 938. Likewise, in Matter of Concourse Ophthalmology, this Court found that ophthalmologists were employees even though they were professionals who worked only part-time for the employer in question and had outside medical 54 practices of their own. See 60 N.Y.2d at 736; see also Matter of Columbia Artists Mgmt, 109 A.D.3d at 1057 (musicians were employees despite being “free to work for competitors”); Matter of Piano Sch., 71 A.D.3d at 1359 (musicians permitted to “hold outside jobs”). Courts regularly find that multiple jobs do not preclude employee status; to the contrary, they simply give rise to multiple employer-employee relationships simultaneously, as when a person works for one employer during the week and a different employer on the weekend. See Walling v. Twyeffort, Inc., 158 F.2d 944, 947 (2d Cir. 1947) (explaining that employees may work for more than one employer); See Matter of Donna Parker Habitat (Comm’r of Labor), 281 A.D.2d 728, 729 (3d Dep’t 2001) (“[A]n employer-employee relationship can still exist even though the people involved are free to work for other[s].”) (quotation marks omitted). It is a fact of modern life that many people work multiple jobs—whether to make ends meet, to develop new job skills, or to pursue some other objective. Low-income individuals have multiple jobs to make up for their extraordinarily depressed wages. But the existence of multiple jobs and multiple employers 55 is hardly limited to such individuals. In the legal profession, for instance, an attorney may teach a class at a law school while also practicing law at a law firm. The attorney is an employee of two different employers—the law firm and the university. This is also true of physicians who teach at a medical school while also working at a hospital or in a medical practice. See, e.g., Potter, 1994 WL 388984, at *5 (concluding that university exercised sufficient control over lecturer to establish employment relationship). Similarly, a yoga instructor is not prohibited from being employed at multiple yoga studios or at a yoga studio and a gym. Because outside employment is not inconsistent with an employment relationship, the Board could have rationally concluded that this factor did not necessitate a finding that the nonstaff instructors are independent contractors.16 16 The cases Yoga Vida relies on are inapposite. Br. at 11-12. As an initial matter, Matter of Barnaba Photographs Corporation (Miller), 289 N.Y. 587 (1942), was overruled by the Legislature’s amendment to Labor Law § 511 in 1992, when it added professional models to the list of workers that are presumed to be employees for unemployment insurance benefits. See Labor Law § 511(1)(b)(3); Assembly Mem. in Support, reprinted in Bill Jacket 56 (continued on next page) Employment Benefits and Taxes. Yoga Vida’s unilateral decision to treat nonstaff instructors as independent contractors for purposes of tax withholding and “fringe benefits” (Br. at 13-14, 16-17) is indicative only of Yoga Vida’s own characterization of its relationship with its instructors. As this Court has warned, the parties’ arrangement concerning benefits, or their written agreement characterizing the relationship, cannot “preclude an examination into the actual relationship of the parties.” Matter of Basin St., Inc. (Lubin), 6 N.Y.2d 276, 278 (1959); see also Matter of Electrolux Corp. (Miller), 288 N.Y. 440, 444 (1942) (explaining for Ch. 668 (1992), at 8-11. In any event, even if the models in Matter of Barnaba were not covered by Labor Law § 511, the models there are distinguishable from Yoga Vida’s instructors. Unlike the models in Matter of Barnaba, the instructors here are integral to Yoga Vida’s business (A. 108); had to teach their class (or provide a substitute) in order to be compensated (A. 39); and were contracted to teach classes for a predetermined period of time (A. 39, 118-119). See 289 N.Y. at 587 (models could be used only once and they were paid regardless of whether they worked). Moreover, the hiring party in Bynog v. Cipriani Group (Br. at 12), exercised no control over the workers (in that case, waiters) because an independent agency hired the waiters, trained them, and was responsible for paying them. 1 N.Y.3d 193, 197-99 (2003). By contrast, as discussed, see supra Point B, Yoga Vida exercised substantial control over numerous aspects of its relationship with the nonstaff instructors. 57 that despite relationship “purport[ed] to be created by the agreements,” the court must “look to the actual practices of the parties”). Indeed, courts in the State have found substantial evidence of an employment relationship despite the hiring party’s denial of fringe benefits or nonpayment of employment taxes. See, e.g., Matter of Columbia Artists Mgmt., 109 A.D.3d at 1057 (musicians were not provided fringe benefits and described in agreement as independent contractors); Matter of Fitness Plus (Comm’r of Labor), 293 A.D.2d 909, 909-10 (3d Dep’t 2002) (lack of tax withholding not dispositive). Here, the failure to withhold employment taxes or to pay benefits does not demonstrate that Yoga Vida lacks control over the manner in which the nonstaff instructors render their services. Cf. Matter of Basin St., 6 N.Y.2d at 278-80 (parties’ agreement designating one entity as withholder of taxes and payer of unemployment contributions not sufficient to make entity employer where different entity exercised “complete control” over services performed); see also Gilmore v. United States, 443 F. Supp. 91, 98 (D. Md. 1977) (explaining that “the label placed upon the 58 relationship by the contract is of little import”). To the contrary, as discussed above, see supra Point B, Yoga Vida has substantial control over all facets of its classes, including the instructors. Similarly, a written agreement stating that the instructors are independent contractors (A. 39) does not undermine the Board’s determination. “[W]here there are numerous indicia of an employment relationship”—as there are here—such contractual provisions are not dispositive. Matter of Wassey (Kenmark Optical Co.), 255 A.D.2d 650, 650 (3d Dep’t 1998); see also Matter of Zelenka (Versace Profumi USA), 304 A.D.2d 927, 928-29 (3d Dep’t 2003) (employment agreement stating that worker is independent contractor “does not compel” a result contrary to the Board’s determination that worker is employee); Matter of Froehlich (Am. Mgmt. Ass’n), 184 A.D.2d 946, 947 (3d Dep’t 1992) (same). To unduly emphasize a hiring party’s own portrayal of its relationship with its workers would permit parties to “all but agree for themselves, simply by adjusting the structure of workers’ compensation packages, whether the workers will be regarded as independent contractors or employees.” Eisenberg, 237 F.3d at 59 116. Consequently, “workers who would otherwise be characterized as employees could accept a relatively larger salary in exchange for foregoing benefits and not having tax payments deducted from their wages,” allowing businesses to intentionally circumvent labor laws enacted to protect workers. Id., at 116. Instructor Compensation. A nonstaff instructor’s ability to negotiate her compensation rather than accept a “set salar[y]” does not negate the substantial control Yoga Vida exerts over various other elements of its relationship with those instructors. Br. at 14-15. As an initial matter, Yoga Vida mischaracterizes the record when it claims that an instructor is always compensated with a percentage of profits. Br. at 14-15. Although instructors can receive a percentage of the revenue generated by a class (A. 60, 103), compensation varies by individual (A. 124), and some instructors are paid a fixed rate per hour or per class, just as staff instructors are (A. 60, 63, 114), or a combination of a flat rate per class and a percentage of revenues (A. 124, 133). Significantly, Patton testified that an instructor’s compensation could change 60 when it was in the interest of the business. (A. 135.) Such control is indicative of an employment relationship. Nevertheless, even if an instructor was compensated based solely on the number of students in the class, tying compensation to an instructor’s popularity incentivizes good performance and is therefore consistent with the type of control that would support a finding of an employment relationship. See Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 30 (1961) (employment relationship despite compensation that included a distribution from profits tied to an employee’s contribution to sales); Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362, 364 (1998) (employee compensation included bonus based on pretax profits of employer); Reichert v. N. MacFarland Builders, Inc., 85 A.D.2d 767, 767 (3d Dep’t 1981) (employment relationship existed despite compensation which included bonuses based on percentage of projects completed and gross profit). Indeed, courts have routinely found the existence of an employment relationship even where a worker did not receive a salary or flat hourly rate. See, e.g., Matter of O’Toole (Biomet Marx & Diamond, Inc.), 13 A.D.3d 767, 768 (3d 61 Dep’t 2004) (compensation based on commission which was percentage of sales); Matter of Esposito (Nat’l Write Your Congressman, Inc.), 264 A.D.2d 927, 928 (3d Dep’t 1999) (sales representative received commission percentage determined by employer); Matter of Wassey, 255 A.D.2d at 650 (employee compensation based on combination of a weekly flat fee and commission); Matter of Polinsky, 163 A.D.2d at 685 (compensation based on percentage of patient weekly charges). 62 CONCLUSION For the reasons discussed, this Court should affirm the Appellate Division’s order. Dated: New York, NY June 5, 2015 BARBARA D. UNDERWOOD Solicitor General STEVEN C. WU Deputy Solicitor General VALERIE FIGUEREDO Assistant Solicitor General of Counsel Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Commissioner of Labor By: ____________________________ VALERIE FIGUEREDO Assistant Solicitor General 120 Broadway New York, NY 10271 (212) 416-8019 Reproduced on Recycled Paper 63