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  1. #1
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    Oct 2013
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    Default Can Employers Reduce Compensation When They Offer Customer Discounts

    My question involves employment and labor law for the state of: California.

    Hi, I am a young attorney in California, trying to do a little research for a friend. If an employer entices customers through use of a Groupon-style discount, can that employer than pass along some or all of the reduction to his/her employees?

    Example: A massage therapist is paid 40% of the price of a massage. Through Groupon, the employer offers discounted massages (say 50%of original value). Can the employer then only pay that employee 40% of the 50% of the massage's full cost?

    Maybe numbers will help, just in case I'm not explaining well. A massage costs $100 an hour. An employee massage therapist is paid 40% by agreement (so $40). Employer decides to offer discounts (ie Groupon), reducing the massage to $50 for an hour. Can the employer now only pay the employee $20, instead of the usual $40?

    Thank you in advance for any insight.

  2. #2
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    Oct 2006
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    16,081

    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    Quote Quoting jdhu
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    My question involves employment and labor law for the state of: California.

    Hi, I am a young attorney in California, trying to do a little research for a friend. If an employer entices customers through use of a Groupon-style discount, can that employer than pass along some or all of the reduction to his/her employees?

    Example: A massage therapist is paid 40% of the price of a massage. Through Groupon, the employer offers discounted massages (say 50%of original value). Can the employer then only pay that employee 40% of the 50% of the massage's full cost?

    Maybe numbers will help, just in case I'm not explaining well. A massage costs $100 an hour. An employee massage therapist is paid 40% by agreement (so $40). Employer decides to offer discounts (ie Groupon), reducing the massage to $50 for an hour. Can the employer now only pay the employee $20, instead of the usual $40?

    Thank you in advance for any insight.
    Are they employees or subcontractors? Do they have any right to decline an assignment or customer?

  3. #3
    Join Date
    Oct 2013
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    3

    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    Thanks for the reply. The system is a bit weird, so bear with me. All massage therapists are required to also do some retail work, and are paid hourly for that (I am 95% sure they have an employment contract labeling them as employees, but I will verify). When they get massage customers, they get a percentage of the cost of the massage. They are not free to decline a customer. I hope that helps a bit; I am not a labor attorney, so have no idea.

  4. #4
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    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    Quote Quoting jdhu
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    Thanks for the reply. The system is a bit weird, so bear with me. All massage therapists are required to also do some retail work, and are paid hourly for that (I am 95% sure they have an employment contract labeling them as employees, but I will verify). When they get massage customers, they get a percentage of the cost of the massage. They are not free to decline a customer. I hope that helps a bit; I am not a labor attorney, so have no idea.
    Do they get W2s or 1099's?

    I suspect that the employer CAN do that.

  5. #5
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    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    They have a contract. What the contract says or does not say matters if the therapists are independent contractors. A written contract does not guarantee a company will make a profit. It does not mean they accounted for every eventuality. Presumably, they can terminate their agreement and seek employment elsewhere. As a group this can give bargaining power.

  6. #6
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    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    If they are employees who get a basic hourly wage and an additional amount for each massage performed as a 'bonus', with their wages not dropping below minimum wage, then the manner in which the additional compensation is calculated is a matter of contract. If they are independent contractors when performing massages, but paid by the hour when they perform other work for the business, as long as they are properly classified as independent contractors it's up to them whether or not they accept a particular customer or accept the offered compensation for a particular customer - with the consequence of refusing clients being the potential end of their independent contractor relationship. You will need to learn the facts and communicate them to us if you want us to be able to answer the question.

  7. #7
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    Oct 2013
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    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    Quote Quoting Mr. Knowitall
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    If they are employees who get a basic hourly wage and an additional amount for each massage performed as a 'bonus', with their wages not dropping below minimum wage, then the manner in which the additional compensation is calculated is a matter of contract. If they are independent contractors when performing massages, but paid by the hour when they perform other work for the business, as long as they are properly classified as independent contractors it's up to them whether or not they accept a particular customer or accept the offered compensation for a particular customer - with the consequence of refusing clients being the potential end of their independent contractor relationship. You will need to learn the facts and communicate them to us if you want us to be able to answer the question.
    Thank you all for the insight thus far. I will speak to my friend tonight and get all the facts.

  8. #8
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    Sep 2013
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    833

    Default Re: Can Employers Pass on Discounts to Employees (Via Reduced Pay)

    It sounds like they may be employees even though there is an attempt to make a piece work-type arraignment on top.
    http://www.edd.ca.gov/pdf_pub_ctr/de38.pdf

    It seems difficult to say an independent contractor cannot determine if they will accept a client if they are paid a percentage of the amount received for the service. What if the spa determined everyone had to pay a fee to the manager be a "member". Then, all members get free massages?

    The first step is to do as Disagreeable wrote. Read the contract. Some spas certainly have those who do the massages be independent contractors. But then, they would be paying at a piece work and not a percentage-based compensation. The problem will be that if the worker disagrees, then the business will not give them any more work. It would be the same as being fired. What real choice will the worker have but find other employment?

    http://www.massagetherapy.com/articl...ractors-Part-1

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