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Bartering Done Right

Bartering Done Right

Many yoga studios allow students to clean the studio, greet guests, maintain inventory, and conduct retail transactions in exchange for free yoga classes and discounted merchandise. Doing so is a cost effective way to foster a sense of community while also minimizing labor costs. However, it is important that your bartering program - be it called Karma Yoga, Energy Exchange, Yoga for Trade, or something else - complies with both state and federal wage laws.

Owning a yoga studio brings many responsibilities, including compliance with federal wage and hour laws. As the Denver, Colorado-based CorePower Yoga (CorePower) learned, even mere allegations of noncompliance can be costly. Just this year, a California federal judge preliminarily approved a $1.65 million class-action settlement to end allegations that the yoga studio chain did not pay minimum wage to some employees who were required to buy discounted studio memberships. The issue originated from a Yoga for Trade program, in which CorePower provided memberships to yoga students who agreed to work a two- to three-hour weekly shift as a cleaner. CorePower started to phase out the Yoga for Trade program in 2013, allowing the former Yoga for Trade students to be part of their Studio Experience Team, in which the students continued to work their weekly shifts for an hourly wage. But, the students alleged that they were required to apply a large portion of their pay toward the purchase of a discounted CorePower membership.The lawsuit alleged that these programs resulted in the students under both programs being paid below minimum wage standards under state and federal law. CorePower denied any wrongdoing.

Here are a few suggestions to help your studio avoid wage and hour law violations and lawsuits.

Properly Classify Your Workers

Proper classification is very important. Many yoga studios classify yoga instructors and other workers as independent contractors. There are many benefits to using contractors over hiring employees because there may be savings in labor costs, reduced liability for the yoga studio, and yoga studios maintain flexibility in hiring and firing. However, misclassification of an individual, including those in your bartering program, as an independent contractor may have a number of costly legal consequences. If a yoga studio’s independent contractor is discovered to meet the legal definition of an employee, the yoga studio may be required to:

  • Reimburse the workers for wages the yoga studio should have paid him or her under the Fair Labor Standards Act (FLSA), including overtime and minimum wage.

  • Pay back taxes and penalties for federal and state income taxes, Social Security, Medicare, and unemployment.

  • Pay any misclassified injured employees workers' compensation benefits.

  • Provide employee benefits, including health insurance, retirement, etc.

Keep Accurate and Detailed Records

For all hourly workers, keep records that include each individual's name, contact information, workweek, hourly rate, daily and weekly hours worked, daily or hourly earnings, overtime pay, and extraordinary additions or deductions from pay for three years. And, specifically, for the individuals in your bartering program:

  • Maintain records of how barterers are compensated. For example, if the barterer is compensated with free classes be sure to indicate the date the classes were provided to the barterer, the value of each class, and make sure that the value of the class meets or exceeds minimum wage laws. In cases where a barterer is subject to both state and federal minimum wage laws, keep in mind that he or she is entitled to the higher of the two minimum wages.

  • Consult a lawyer when requiring barterers to apply a portion of their pay toward the purchase of a discounted membership or classes.

  • Provide a option for monetary payment if the barterer relocates and is unable to redeem the classes earned and make sure the earned classes never expire.

Understand the Basic Overtime Rules

Monitor how many hours the barterer is working each week. Know that unless the barterer is exempt, he or she is covered by the FLSA and must receive overtime pay for hours worked over 40 in a workweek of at least 1.5x his or her regular rates of pay. Note that:

  • The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.

  • Understand that when calculating overtime, the averaging of hours over two or more weeks is not permitted.

  • Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

If you have any questions about your studio's bartering program or any other legal topics related to your yoga business, schedule a free consultation.

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