Massage Therapist Contractor Agreements Explained
What’s a Massage Therapist Contractor Agreement?
A massage therapist contractor agreement is a legally binding document that outlines the terms of a working relationship between business owners and independent contractors at a massage practice. This document is important for keeping track of who does what in a massage practice. It establishes expectations, describes responsibilities, and lists specific duties . These agreements help businesses avoid unnecessary conflicts, and can provide tangible proof in the event of a challenge to the terms of an independent contractor agreement. Making sure that everyone is on the same page is essential for a functionality of a successful massage therapy practice.
Essential Elements of the Agreement
When drafting a massage therapist contractor agreement, the following components should be included:
Payment Terms and Schedule.
Whether the employee will be paid by commission or hourly and how often the massage therapist will be paid (i.e., weekly, bi-weekly, monthly, annually).
Description of Losses.
What will happen if there is a loss at the wellness center/spa where a massage is rendered, e.g., the massage client is unhappy with the therapy session or the service provided by the massage therapist?
Client Referrals.
Information regarding whether the cost of providing client referrals is the obligation of the massage therapist or the employer.
Confidentiality and Non-Disclosure Provisions.
Whether the employer needs to keep its client list confidential is an important issue to address.
Employment Exemptions.
If the massage therapist is paid strictly on commission, whether they are exempt from the Fair Labor Standards Act and/or Missouri’s Minimum Wage Law.
Competition Provisions.
Whether the employer needs to prevent the massage therapist from soliciting their current or past clientele once the contract ends is also an important issue to address. Further, if an ex-employee solicits clients, the employer may have an action for tortious interference with business expectancy.
Liability Issues.
Whether the massage therapist should be covered by the spa/wellness center’s insurance or their own insurance.
Termination.
If the massage therapist is not an employee in any capacity, whether the parties have to meet certain requirements before terminating the relationship. For example, under the Missouri Revised Statutes, each party must give the other at least 30 days’ notice that they intend to terminate the independent contractor contractor relationship. The parties may, however, shorten this time period by mutual agreement.
Legal Considerations and Requirements
It is essential for both the massage therapist and the employer to understand the legal aspects of a massage therapist contractor agreement. Since state laws differ on the definition of independent contractors, it is crucial to have a clear understanding of how your state classifies employees for tax purposes. It is also important to be sure that the 1099 tax form is issued in lieu of the W2.
While most states consider employees any individuals that work for a company within their state for compensation, the IRS has its own definition that focuses on the degree of control the employer has over the worker. Under the IRS definition, there are three areas that are evaluated when determining whether or not an individual is an employee or independent contractor.
Behavioral Control looks at whether the company supervises or has the right to supervise the employee. If the company provides specific instructions on how and when work is done, then the person is likely to be considered an employee. Since most employers and business owners do not control how massage therapists provide treatment to clients, most will be considered employees.
Financial Control examines whether the business or the individual controls the financial aspects of the business. If the individual is able to operate other businesses, advertise and market the business and controls his or her own business expenses and financial records, then that person would be considered an independent contractor.
A Company Relationship examines if there are written contracts, marketing, or benefits offered. While the absence of these factors does not determine whether or not a person is an employee, their presence can indicate either status. Having a written agreement and advertising targeted to the therapeutic massage can help show that the therapist truly is independent.
In order to be classified as a valid independent contractor it is important to follow IRS guidelines. Individuals that are classified as employees are responsible for paying income tax and Medicare and Social Security taxes. For any massage therapists that have formed a business entity, there are additional tax requirements that need to be handled.
Advantages of Contractor Agreements for Massage Practices
Contractor agreements are beneficial for both massage therapists and massage therapy businesses. Too often this type of independent contractor relationship can be misunderstood by both parties. Having a written agreement allows both the independent contractor and the massage clinic to have clear understandings and expectations about the relationship.
From a business perspective, having a properly worded contractor agreement will also help manage risk. The duty for the clinic or spa operator to safeguard itself, its clients and guests is enormous . In the event of legal action against a massage business for the actions of the independent contractor, having a properly drafted contractor agreement can go a long way to shielding the massage therapy clinic from such risks.
In addition, it is important to note that there are federal and state laws which govern independent contractor relationships. Failing to abide by such laws can create liability for employers. Having a written contractor agreement will give the massage therapy business some protection.
Common Pitfalls to Avoid
Even drafters with hours of experience can make errors when creating contracts for massage therapist contractors. Errors in contractor agreements can lead to steep tax and liability penalties. These problems may be caused by an oversight or an assumption that the employee will not question the terms and thus any mistake can go unchallenged. However, intelligent massage therapists are ready and able to challenge their rights and employment status in court or with the IRS. Even if a massage therapist contractor does not contest an agreement, a federal or state employment agency may choose to evaluate the situation and levy heavy fines on your business. Here are some mistakes that businesses often make and how to avoid these problems:
Mistake: No formal Contractor Agreement
Solution: Always have a written agreement for every contractor, even if the business has no other employees.
Mistake: Incorrect classification as Independent Contractor when the work is that of an employee.
Solution: Clearly detail all support and limitations on self-management in the contract.
Mistake: Implied exclusivity of service.
Solution: Specify all possible sources for clients. Strengthen this by dictating what type of clients are acceptable sources of service.
Mistake: Unreasonably low hourly wage.
Solution: Consider a minimum wage that the business needs to meet to possibly satisfy the business judgment rule.
Mistake: Non-business asset ownership.
Solution: Require any tools and vehicle use to be owned or hired by the contractor.
Mistake: Lack of confidentiality requirements.
Solution: Ensure that there is some confidentiality agreement included in the contract.
Tips for Drafting an Effective Agreement
When I explain who MassageTherapistContractor.com is, the question comes up, "how do you create these agreements?" The answer is I have a "day job" as a business attorney and I draft agreements in my practice. I’ve spent the better part of my career writing contracts for companies. The unfortunate part for me is that lawyers usually end up getting involved in the disputes when a party violates a contract, which is not very fun, so I’d much prefer for you to use these agreements to avoid a dispute with any independent contractor massage therapists and to keep them happy.
I like to start with a simple list of topics to cover: The specific terms of the relationship are more important, but the additional items give you an opportunity to show your therapist clients that you understand the business side of massage therapy. In addition to basic contact information, like the names of the parties, I like to include definitions for any terms used in the agreement, including "massage therapy," "communications", "services", and "business name." Since many agreements are drafted in the context of a larger business arrangement with multiple service providers, and since the language in many agreements is very generic, it makes sense to define your particular business here. Is "massage therapy" limited to a particular type of massage therapy, like hot stone or chair massage?
Next, explain the services. Since you work with multiple clients, when do you expect your provider to be available? When will they actually service clients? If they are performing massage therapy at your location, then what are the hours and the days they should be available? What happens if you close early or the client cancels their appointment for whatever reason? What about other times you want them to use their time for training , communicating with clients, social media, or updates to your website?
Then, the relationship itself. This does include the concept of independent contractor, but you can also include how you determine their income, who will set pricing for their services, and whether they will get a share of tips or will they be required to charge for tips (so you can count them for taxes)?
Third, the money. What will you be paying them, exactly, and how often? Will it be per massage, per hour, or a flat fee? When, how and where will payments be made? What else can they sell while working with you (essential oils?)
Fourth, communications. How will you communicate with your massage therapist? Will you primarily use email or text messages? What about a video chat or face to face? What about technology? Will your therapist need to always have an updated phone or tablet, and be proficient in using them?
Finally, the conflict resolution. What happens if the massage therapist someone else complains? Different clients have different expectations and preferences, so ideally, this section will get into how you identify client issues, how feedback is given to the therapist, and whether they can make changes to better satisfy the client. When the communication fails and the complaint escalates, what happens next? What are the consequences for a failure to resolve an issue?
The rules we mentioned earlier apply to contracts generally. You’ll need to get agreement from the other party to your contract, but this is an independent service provider (not an employee), and you should have some sort of consideration exchange to make it binding. If you don’t address these issues in your agreements, you leave it up to the courts to interpret.
Once you have gotten to a place where you have the terms and topics, you just have to write it down.