Independent Contractor or Employee? Classifying Instructors

Key Takeaways

• Federal enforcement has reversed but legal risk remains: The DOL stopped enforcing its 2024 six-factor test as of May 1, 2025, but the rule remains valid in private litigation and courts, leaving studio owners exposed to lawsuits even as federal audits decline.
• Settlement costs are climbing into eight figures: Equinox paid $36 million to settle California misclassification claims, and other fitness companies have settled for $12 million plus $4 million in attorneys' fees, signaling high litigation stakes across the industry.
• Barre studios' operational norms trigger misclassification red flags: Requiring instructors to wear branded apparel, follow specific choreography, or attend mandatory meetings creates employer control that undermines independent contractor status under federal and state tests.
• Per-class pay structures mask unpaid labor: Instructors typically earn $30 per class but invest hours in playlist curation, choreography development, and training that go uncompensated, a practice that denies them overtime protections they may be entitled to.
• California's AB5 sets the strictest standard: AB5 presumes all workers are employees unless the employer proves the work is outside the company's usual business, making nearly all barre instructors in California legally employees.
• Termination triggers audits: Filing for unemployment after termination is the biggest trigger for worker misclassification audits, and contractors are not eligible for unemployment benefits, immediately flagging potential violations.

The $36 Million Wake-Up Call for Fitness Studios

In September 2026, the barre and boutique fitness sector faces a legal landscape more uncertain than at any point in recent memory. While the U.S. Department of Labor published a final rule in January 2024 tightening standards for independent contractor classification, the agency reversed course in May 2025, announcing it would no longer enforce that framework. Yet the rule remains legally valid, and private lawsuits continue to cite it. Meanwhile, settlements are climbing: Equinox agreed to pay $36 million to resolve California class and PAGA claims, and other fitness companies have settled misclassification cases for nearly $1.5 million and $12 million plus $4 million in attorneys' fees.

For studio owners who classify instructors as 1099 contractors, the question is no longer whether the rules are changing. It is whether their business can survive the cost of getting classification wrong.

What Changed in May 2025 and Why It Does Not Protect You

Effective May 1, 2025, the DOL announced it will not enforce the 2024 Rule when determining worker classification, instead relying on older guidance from a 2008 fact sheet and a 2019 opinion letter. The 2024 rule had imposed a six-factor test examining opportunity for profit or loss, relative investments, the nature and degree of control, whether work is integral to the business, permanence of the relationship, and worker skill and initiative.

The policy shift creates a dangerous illusion of relief. The 2024 Rule remains legally valid and may still be used in courts, meaning private plaintiffs and state enforcement agencies can continue to apply the stricter standard even as federal audits decline. Studio owners operating in California face an additional layer: AB5 presumes all workers are employees, with the burden of proof on the employer to demonstrate the worker is outside the usual course of business.

How Barre Studios Accidentally Create Employment Relationships

The operational realities of running a high-quality barre studio often contradict independent contractor classification. Small studios frequently ask instructors to wear branded merchandise or specify equipment and methods, attempting to deliver a consistent customer experience. Many require instructors to attend training sessions, staff meetings, or brand alignment workshops. Some mandate specific music genres, choreography sequences, or even the language used during class.

Each of these requirements strengthens the argument that the studio controls how, when, and where the work is performed. A common misclassification issue occurs when instructors teach at multiple studios and claim to run their own fitness business; however, the IRS and state agencies would generally disagree, since they are being told when to show up, how to do the work, and when to go home.

The Integral Business Test

Under both the 2024 DOL rule and California's AB5, one decisive factor is whether the work is integral to the employer's business. A barre instructor teaching a branded barre class in a studio that markets barre classes is performing work central to the business, not ancillary services like plumbing or tax preparation. Under AB5, workers must be designated as employees if their work is part of a company's regular business, a standard that applies directly to instructors in boutique fitness.

The Hidden Labor That Per-Class Pay Ignores

Most barre instructors earn around $30 per class, with annual income depending on how many classes they teach per week. An instructor teaching 10 classes per week earns approximately $15,600 annually, while someone teaching 30 classes earns closer to $46,800. But these figures only account for time physically present in the studio.

Instructors work dozens of hours beyond class time for training, preparing, developing routines, compiling playlists, and attending meetings, yet are only compensated for 45 to 90 minutes of teaching. Classifying these workers as independent contractors denies them overtime pay and other protections. If an instructor is reclassified as an employee in a lawsuit, all of that unpaid prep time becomes compensable at minimum wage or higher, plus overtime premiums, plus penalties and attorneys' fees.

Why Young Instructors Are Filing Claims

Katie Santos, owner of Fitness HR and consultant to boutique studios, has observed a generational shift. Many studios do not realize laws are changing in favor of employees, younger employees know how they should be classified, and penalties for misclassification can be harsh and put a studio out of business.

This awareness is driving claims. When a studio terminates an instructor classified as a contractor, many file for unemployment, which is the biggest trigger for worker misclassification audits. Contractors are not eligible for unemployment benefits, immediately flagging the relationship for review by state agencies.

The Real Cost Difference Between Employees and Contractors

Most gym owners see independent contracting as a way to avoid administrative demands of payroll, wage and hour compliance, and taxation that come with having employees. However, the unfortunate truth is that cost and liability increase when you retain independent contractors rather than hire employees, especially when you unknowingly create an employee environment.

Employers pay approximately 7.65 percent in FICA taxes, state unemployment insurance, workers' compensation premiums, and compliance costs. But misclassification exposes studios to back wages, liquidated damages equal to unpaid wages, civil penalties, and plaintiff attorneys' fees that can dwarf the original payroll cost. Most fitness misclassification cases settle out of court to avoid high litigation costs, but settlements themselves can exceed $1 million.

Xponential and the Franchisee Wage Crisis

Xponential Fitness, which operates Pure Barre and nine other brands, faced a class action suit filed in November alleging that franchisee Mitch Brown, who owned nearly 70 studios across 17 states including Pure Barre locations, had not properly paid employees since acquisition. The law firm Willis Spangler Starling filed the suit with nearly 30 employees as plaintiffs. While Xponential is a franchisor rather than direct employer, the allegations underscore how widespread wage and classification violations have become in the boutique fitness sector.

What This Means for Studio Operators

Editorial analysis, not reported fact:

The May 2025 DOL enforcement pause does not reduce your legal exposure. Private plaintiffs, state agencies, and unemployment systems still apply strict classification tests, and the financial stakes now include eight-figure settlements. If you require instructors to wear branded clothing, follow a proprietary method, attend meetings, or use studio equipment, you are likely exercising employer control. If barre classes are your core service and instructors deliver those classes, their work is integral to your business.

The operational choice is not between contractor and employee. It is between proactive compliance and reactive defense. Reclassifying instructors as part-time W-2 employees increases immediate payroll cost by 10 to 15 percent but eliminates the risk of six-figure settlements and business-ending penalties. Studios should audit their current practices against the six-factor DOL test and California AB5 standards, document any legitimate independence (such as instructors setting their own rates, marketing their own services, or providing classes under their own brand), and consult employment counsel before the next termination triggers an audit.

The boutique fitness industry is no longer operating in a gray area. The law has clarified, and the cost of ignoring it has become existential.

Sources & Further Reading

• U.S. Department of Labor, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, final rule and rulemaking history
• Atlas HXM, Independent Contractor Classification in 2025, analysis of May 2025 DOL Field Assistance Bulletin
• Barre Certification, Barre Instructor Salary, compensation data and per-class pay structures
• Kitchin Legal, California Flexes Its Muscles to Remind Fitness Studio Owners, Equinox settlement and AB5 enforcement
• Littler, What Misclassification Issues Are There in the Workout Place, red flags and settlement trends
• Nakase Law Firm, Are Yoga Instructors Employees or Independent Contractors Under California AB-5?, AB5 legal standards and application to fitness
• The Fitness CPA, Employees vs. Contractors for Gyms, cost analysis and liability comparison
• WellnessLiving, Legal Differences Between Fitness Contractors and Employees, audit triggers and compliance guidance

Editorial coverage of publicly reported industry developments and regulatory changes. Barre Diary has no commercial relationship with any companies or law firms named in this article. This content is for informational purposes only and does not constitute legal advice. Studio operators should consult qualified employment counsel regarding their specific classification practices.