Youth club sports teams in California must properly classify coaches as contractors or independent employees to avoid potential legal issues down the road. Legal issues that could arise if you misclassify your coaches include a California Employment Development Department (EDD) audit, a workers’ compensation agency audit, or legal action from a coach who believes that they have been misclassified – each of which can result in a high level of legal liability. exposure. The good news is that there is a pretty clear roadmap you can follow if you want to put your organization in the best position. This overview will provide an 11-step action plan that any California youth club sports team can follow.
Bad news, good news
A bit of context first. As most California businesses know, state legislators passed Assembly Bill 5 (AB 5) in 2019 to enshrine the “ABC test” to determine whether an individual is classified as an employee or independent contractor in the law. This new law threatened to disrupt business as usual for most organizations that used contract labor, as the ABC test is notoriously difficult to pass and seeks to define as many working relationships as possible as an employee-employer. .
But in 2020, a follow-up bill offered some form of salvation for youth sports clubs. AB 2257 added “sports coaching for young people” to the list of companies that may qualify for an exemption and escape the ABC test. If your organization is considered a “referral agency” and the coach in question is considered a “service provider”, you will be in luck and will only have to pass a flexible and lenient test to confirm the independent contractor status. But to take advantage of this escape route, the relationship in question must satisfy 11 different factors.
Proceed with caution: not an automatic adjustment
Applying the exemption for referral agencies/service providers to youth sports coaches, however, presents some challenges. The assessment of the 11 factors will depend on your club’s operational relationship with coaches and the terms of any Independent Contractor Agreement currently in use. To determine if the “referral agency/service provider” exemption applies to your youth sports club, it is best to meet with your labor lawyer for a thorough analysis based on your club’s existing agreements and operational structure. .
11 Action Steps for Your California Youth Sports Club
With these precautions in mind, here are 11 steps you can take to put your youth sports club in the best possible position when it comes to properly classifying your coaches as independent contractors.
- Above all, the service provider must be free from control and direction of the reference agency in the context of the execution of the work to meet the standard, both contractually and de facto. This means that your club should not exercise direction and control over how coaches do their job. If coaches have the discretion to develop and implement their own program, then the overall definition is likely satisfied. If not, the coach may not be able to meet this exemption factor. You should consider including language to this effect in a written independent contractor agreement to help satisfy the first factor.
- If the work for the client is performed in a jurisdiction that requires the service provider to have a business license or business tax registration In order to provide the Services under the Agreement, the Service Provider must certify to the Reference Agency that it has the required business license or tax registration. Therefore, check to see if the city or county in which your club operates requires coaches to have a business license or professional tax registration for coaching duties. If the coaches are registered as a real business – with an applicable business license and business tax registration – this would strengthen the argument that the coaches are independent contractors. You should consider adding this requirement to your coaching agreement to reinforce satisfaction of this element of the exemption.
- Similarly, if the work requires the service provider to hold a state contractor license, the service provider has the required contractor license. Verify that your trainers have all the necessary licenses to perform the job. California does not currently require a state contractor license for youth athletic training, but please be sure to be aware of any potential changes that may impact sports for youngsters and be prepared to rotate if necessary.
- Similarly, if there is a applicable professional license, permit, certification or registration administered or recognized by the state available for the type of work being performed, the Service Provider must certify to the referring agency that it has the appropriate license, permit, certification, or professional registration. Just like the previous two items, verify that all of your trainers have valid credentials.
- The service provider must provide services under the name of the service provider, without being required to provide the services under the name of the reference agency, in order to pass the test. You should require coaches to provide coaching services under their name (ideally their business name) rather than the club name. This means that coaches must enter into a contract with the club and bill the club (or the players in the team) under their own name. Since it would probably be odd for a coach to charge players directly, it would be appropriate for the club to collect a “coaching fee” from the players on behalf of the coaches and then pay that fee (without any deductions) to the coach or to the coach. business entity.
- The service provider must provide own tools and supplies to perform the services to satisfy the law. Therefore, coaches must provide their own tools and supplies to perform their coaching duties. This means they must bring their own cones, clipboards, whistles, etc. for training.
- The service provider must be habitually carry on or have previously carried on an established business or trade independently of the same nature or in connection with the work performed. Therefore, the coach candidates you retain should have a history of engaging in coaching services and a history of doing so with some regularity. While this factor may present a gray area for new coaches, you can verify that any new coach intends to usually engage in independent coaching from now on to put themselves in the best position.
- SEO agency cannot prevent the service provider from maintaining its own customer base, as they should be free to seek work elsewhere – including through a competing referral agency – in order to pass the test. Your agreements with coaches should not prohibit them from providing coaching services to others, including competing clubs. To satisfy this exemption factor, your coaching agreements must include language stating that coaches have the right to provide similar services to others.
- The service provider must set their own working hours and conditions or negotiate their working hours and conditions directly with the client to make the call under the law. Therefore, your coaches should generally be allowed to determine their own times and set their own practice schedules and schedules.
- Without deduction by the referring agency, the service provider must be able to set their own prices, negotiate their rates with the client through the reference agency, negotiate the rates directly with the client or be free to accept or refuse the rates set by the client. Your coaches should therefore be allowed to set their own rates for coaching services. Although it is currently unclear whether clubs can dictate rates, allowing a coach to negotiate and set their own rates for their services would help satisfy this exemption element. Since it would be unusual for a coach to directly invoice each player for coaching services, the law allows a club (as a “referral agency”) to collect payment on behalf of players (“clients”) and to pay this payment – without deduction – to the trainers (the “service provider”).
- Finally, the service provider must be free to accept or refuse clients and contracts without being penalized in any form by the sponsoring agency (but this does not mean that it can accept a client or a contract and then default on its contractual obligations). In other words, clubs should consider giving coaches discretion to choose the players who make up the squad. This practice would help support the satisfaction of this factor. However, if a club chooses players and does not give coaches a say in the process, there is a risk that some may argue that this factor is not being met. Remember that all 11 factors must be met to be exempt from the ABC test under the referral agency/service provider exemption.
Classifying individuals as employees or independent contractors can be tricky, especially in California. Between the ABC test, the most flexible test, and the exemption factors from referral agencies/service providers, youth sports clubs are understandably confused when it comes to determining whether an individual should be an employee. or an independent contractor.
Fisher Phillips Legal Assistant Omeed Askari Behbahani contributed substantially to the development of this Insight.