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Indian Springs Resort fighting labor board ruling and big fine

By Kim Beltran

Tribune Editor

     Indian Springs Resort owners are fighting a ruling by the state Labor Commissioner's office that 37 estheticians and massage thera­pists working at the spa should have been treated as employees rather than independent contrac­tors. The resort was ordered to pay a fine of $1,000 per worker, or $37,000.

John and Pat Merchant, who own Indian Springs, appealed the initial ruling of the Division of Labor Standards Enforcement (DLSE) but the office's decision was upheld following a hearing in Santa Rosa on Aug. 18. 

The Merchants were notified by the DLSE that they could file a writ of mandate to argue their case in court – something Indian Springs manager Erik Fair said the couple had vowed to do.

“It's really worth the fight,” Fair said. “Pat has expressed an interest in taking this as far as it can go.”

Indian Springs' troubles with the labor commissioner started when a deputy visited the resort on Dec. 10, 2007. After reviewing records and speaking with Fair and some of the workers, the deputy later ruled that the independent contractors were actually employ­ees who should have been covered by workers' compensation insur­ance obtained by the resort.

Fair said Indian Springs provid­ed all the paper work for their independent contractors, from IRS forms to business permits, and that the resort stands by its assertion that these workers are not employ­ees.

The DLSE did not agree, although even the department's own website states that a worker may be classified as an employee by one labor-related division and as an independent contractor by another.

“Since different laws may be involved in a particular situation such as a termination of employ­ment, it is possible that the same individual may be considered an employee for purposes of one law and an independent contractor under another law,” the site states. “Because the potential liabilities and penalities are significant if an individual is treated as an inde­pendent contractor and later found to be an employee, each working relationship should be thoroughly researched and analyzed before it is established.”

The site also states that “there is no set definition of the term 'inde­pendent contractor' and that “in handling a matter where employ­ment status is an issue…DLSE starts with the presumption that the worker is an employee.”

Six other local spa owners or managers contacted by the Tribune all said the same thing: All of their massage therapists are treated as employees.

Kathy Quast, who with hus­band Michael, owns and operates the Roman Spa and the Baths at the Roman Spa, said they employ­ee about 20 massage therapists, all of whom are employees, most part-time.

It was a year ago that the Quasts purchased the Oasis Spa next door to their Roman Spa and renamed it. Kathy Quast said the former owners of the Oasis Spa “had issues” with the labor board over their independent contractors ~as well.

“The state of California does not want any independent contrac­tors,” Quast said. “They're really cracking down.”

Diane Barrett, co-owner of Calistoga Spa Hot Springs said the resort probably has 25 massage therapists, all employees.

“We don't use them [independ­ent contractors],” she said. “Never have.”

Managers at the Lavendar Spa, Mt. View Hotel & Spa and Spa Solage, each of which employs around 20 massage therapists, said the same thing: They're all classi­fied and treated as employees.

According to Greta Zeit, one of the massage therapists at Indian Springs, she and the 36 other inde­pendent contractors at Indian Springs want to remain just that -independent contractors.

In fact, she said, they've formed a group that they hope will grow in number and lobby the state for change.

Zeit said being an employee will negatively impact her in that she will no longer be able to con­trol her own schedule and that she will probably earn less than half of what she does now.

In a letter to Sen. Barbara Boxer, Zeit said the labor board is trying to lump massage therapists and estheticians into a what the state calls an “underground econo­my,” one in which employers and their workers don't pay taxes.

“I, as well, as my fellow work­ers, file a Schedule C and pay any taxes which are due, both to the Federal and State governments,” she wrote. “I want the right to con­tinue to choose the way I work.”

Fair sited the Oasis Spa and the Calistoga Massage Center as being victims of the state's policy on independent contractors.