Protecting Employers Since 1985

May 2011

By: Nancy E. Joerg, Esq.

A recent and well-reasoned U.S. Tax Court decision found that massage therapists who rent space at a spa are independent contractors for Federal employment tax purposes. Although this ruling is directly important for IRS purposes, it also provides some great tips for other kinds of legal challenges to the independent contractor status of massage therapists.

GOOD FACTS FOR INDEPENDENT CONTRACTOR STATUS: In Cheryl A. Mayfield Therapy Center v. IRS, T.C. Memo 2010-239, the U.S. Tax Court found that the massage therapists were independent contractors primarily because they rented space from the spa. In all kinds of independent contractor cases, when an independent contractor has a fixed rental to use space on the premises of the company for whom it provides services, this is a major boost toward strengthening independent contractor status. Think about it-employees don’t rent space from their employers!

The U.S. Tax Court also noted, with approval, that the independent contractor massage therapists set their own schedules and were free to accept or reject any work offered by the spa’s receptionists.

The independent contractor massage therapists were free to charge less for their services even though the spa posted suggested prices.

The U.S. Tax Court observed with approval that the independent contractor massage therapists bought their own tools and supplies and were responsible for obtaining the proper licensing.

Other factors that were in favor of independent contractor status were that the spa did not give the independent contractor massage therapists any employee benefits such as sick leave or vacation and did not pay any business or travel expenses.

BAD FACTS FOR INDEPENDENT CONTRACTOR STATUS: Facts which tended to go against independent contractor status were also present in this case. The spa collected customer payments, prepared weekly payout sheets for the massage therapists, and paid the massage therapists on a weekly basis.

In this case, as in most, there were many factors that went for and against independent contractor status, but the U.S. Tax Court ruled that the proper classification was independent contractor status and not employee status.

GREAT TIP: CHARGE THE INDEPENDENT CONTRACTOR A FIXED RENTAL: This U.S. Tax Court decision offers insightful guidance on a how a spa can structure an independent contractor relationship with an independent contractor massage therapist who will perform his or her services at the spa. The fact that the independent contractor massage therapists paid a fixed fee rental to the spa was a very strong factor here pointing to independent contractor status. When independent contractors perform their services on the premises of the company for whom they provide services, it is always a “great tip” for the company to the charge the independent contractor a fixed fee rental.

Questions? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at

Areas of Practice: Nancy Joerg is nationally known as a leading authority and respected consultant on independent contractor status. She drafts independent contractor agreements and represents companies in state and federal audits and hearings regarding independent contractor status. Nancy Joerg regularly represents employers in administrative actions and audits before the Equal Employment Opportunity Commission, the Illinois Department of Human Rights, the Illinois Department of Employment Security, the Illinois Department of Labor, and the U.S. Department of Labor. She represents employers in all types of discrimination charges, unemployment insurance hearings, employee termination issues, and wage & hour issues (including exempt/non-exempt status for overtime, deductions from wages, and state and federal wage claims). Nancy Joerg effectively counsels and advises clients concerning preventive efforts such as the preparation and review of employee handbooks and personnel policies, severance and release agreements, anti-harassment training, sex harassment investigations, and the development of strategies to help ensure exemptions from overtime.

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