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Personal Trainers: Employee or contractor? Why does it matter?

scott-mckenzie

Welcome to another amazing guest post from Scott McKenzie – Director at Velocity Legal and Fitness industry expert. Personal Trainers and Club owners should ensure they are familiar with the differences, because getting it wrong could be very costly.

Disregarding the employee vs contractor distinction is like doing deadlifts with sloppy form. You might get away with in the short term, but if you do, then it’s only a matter of time before you feel the pain.

Let’s start with key thoughts:

  1. Whether a personal trainer is an employee or a contractor has significant implications from a legal perspective.
  2. Personal trainers and gym owners can suffer financially if they do not fully understand the difference between employment and contractor relationships.
  3. If a member gets injured whilst under the supervision of a personal trainer, it is likely that the exact type of relationship between the personal trainer and the gym owners (i.e. employee or contractor) will be closely scrutinised.
  4. Just labeling a personal trainer as an ‘independent contractor’ is not enough. The arrangement must also be documented and implemented correctly.

Why it matters:

Gym owners have very different legal obligations, and personal trainers have very different legal rights, depending on whether a personal trainer is an employee or an independent contractor. Some of the ‘big ticket items’ include:

  1. Tax and superannuation:

(a) Employers are required to take care of tax compliance on behalf of their employees. However, independent contractors are essentially working for themselves and are expected to manage their own tax compliance (e.g. income tax and GST).

(b) Independent contractors will need to make their own superannuation contributions. However, there are some general exceptions to this rule which may apply (for example, where a contractor is hired principally for labour and is, therefore, an employee for superannuation purposes).

2. Employee entitlements: 

(a) Employees receive a number of entitlements which are protected by law, such as annual leave, personal leave, a minimum wage and long service leave (although these benefits may not be provided to some casual employees). Independent contractors do not automatically receive these entitlements.

3. Insurance and Liability:

(a) Personal trainers who are independent contractors are generally expected to arrange their own insurance.

(b) From a liability standpoint, independent contractors are usually held liable for the legal risk involved with the services they provide to members.

4. Training plans:

(a) Intellectual property created by an employee is traditionally considered to be the property of their employer, whereas intellectual property created by an independent contractor is usually deemed to be the property of the independent contractor.

(b) For instance, intellectual property would arguably include all training plans and meal plans created by personal trainers for clients. However, a gym owner may contractually agree with their personal trainers that all intellectual property created by the trainer is the property of the gym.

Contractor or employee? How do I know?

Determining whether a personal trainer is an employee or a contractor is a matter of looking at the circumstances holistically and determining whether the arrangement was in substance an employment or a contractor relationship. There is no single factor or set of factors that will automatically make a personal trainer an employee or a contractor.

A few indicators that a personal trainer may be a contractor or an employee are set out below:


EMPLOYEE

  1. Required to attend the gym at certain times on certain days.
  2. Must wear a uniform with the gym’s logo and which looks like they are providing services on behalf of the gym.
  3. Required to assist with other club duties such as re-racking weights or helping out on reception.
  4. Provided with training plans which the personal trainer must follow.
  5. Prohibited from sub-contracting, and expected to provide all services personally.
  6. Required to charge prescribed fees to clients.

CONTRACTOR

  1. Complete control over how and when training sessions are provided.
  2. Services routinely provided to both members and non-members of the gym.
  3. Trading under a company structure with their own ABN.
  4. Sub-contracting some of their training sessions to other authorised trainers.
  5. Adopting their own branding.
  6. Flexibility to charge different fees to different clients.
  7. Able to promote training services unrelated to the gym on social media.

Gym owners – penalties for getting it wrong

Gym owners must be very careful to not treat an employee as if they were a contractor. The law contains specific prohibitions against:

  1. disguising an employment relationship as an independent contracting arrangement;
  2. dismissing an employee to re-engage them as an independent contractor; or
  3. knowingly make a false statement to persuade or influence an employee to become an independent contractor.

Gym owners who breach any of the above legal requirements face fines of up to $33,000.

Final thoughts 

Disregarding the employee vs contractor distinction is like doing deadlifts with sloppy form. You might get away with in the short term, but if you do, then it’s only a matter of time before you feel the pain.

Scott McKenzie is a Director at Velocity Legal. Scott is recognised as a fitness industry expert and has a wealth of experience solving complex legal issues. If you would like any assistance in relation to documenting or implementing personal trainer independent contractor agreements, you are welcome to contact Scott by email at scott@velocitylegal.com.au.

Disclaimer – This article is the opinion of the author and in no way constitutes legal advice.

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