Per Class, Per Session, Per Lawsuit: Wage & Hour Risks in Boutique Fitness

The boutique fitness boom, from cycle dungeons and yoga studios to Pilates clubs and Lagree shops, has created a thriving industry projected to outpace national employment growth averages for years to come. But behind the curated playlists and aspirational branding lies a thicket of wage-and-hour compliance issues that have already cost fitness companies millions of dollars in litigation and settlements.

Whether the business is a single-location studio or a multi-unit franchise, two interrelated compliance areas demand close attention: (1) the classification of fitness instructors as W-2 employees versus 1099 independent contractors, and (2) the wage and hour implications of non-hourly pay structures such as per-class, per-session, piece-rate, and commission-based compensation.

These issues intersect with the Fair Labor Standards Act (FLSA), a shifting regulatory landscape at the Department of Labor (DOL), and an increasingly aggressive state-law environment.

The Classification Issue: Employee or Independent Contractor?

Why the Fitness Industry Is Uniquely Vulnerable

The fitness industry has long operated on a model in which instructors teach at multiple studios, set their own training methodologies, and maintain personal client followings, features that superficially resemble independent contractor status. Over half of fitness trainers and instructors are self-employed in some capacity, and many prefer the flexibility of contractor arrangements. Studios, for their part, benefit from reduced payroll tax obligations, no requirement to provide benefits, and the administrative simplicity of issuing 1099-NECs rather than W-2s.

However, the economic realities of many fitness instructor relationships strongly point to employment. A group fitness instructor who teaches scheduled classes at a studio’s location, follows the studio’s set curriculum or format, wears branded attire, is required to attend staff meetings, and relies on the studio to provide the physical space, equipment, and client base is, in most jurisdictions, an employee, regardless of what the engagement letter says.

The Federal Framework and the Economic Realities Test in Flux

Under the FLSA, worker classification is governed by the “economic reality” test, which asks whether a worker is economically dependent on the business (and therefore an employee) or is genuinely in business for themselves (and therefore an independent contractor). The test has been the subject of considerable regulatory back-and-forth in recent years.

In January 2024, the Biden-era DOL promulgated a final rule adopting a six-factor “totality of the circumstances” test that weighed all factors equally: (1) the worker’s opportunity for profit or loss based on managerial skill; (2) investments by the worker and the business; (3) the degree of permanence of the relationship; (4) the nature and degree of control; (5) whether the work is integral to the employer’s business; and (6) the worker’s skill and initiative. That rule, which was generally viewed as making it more difficult to classify workers as independent contractors, took effect in March 2024.

However, on May 1, 2025, the Trump administration’s DOL Wage and Hour Division issued Field Assistance Bulletin No. 2025-1, announcing that it would no longer enforce the 2024 Rule and would instead revert to the traditional economic reality framework outlined in DOL Fact Sheet #13 (July 2008). That traditional framework is widely viewed as more employer-friendly, placing greater emphasis on two “core” factors: the degree of control over the work and the worker’s opportunity for profit or loss. In February 2026, the DOL published a Notice of Proposed Rulemaking seeking to formally rescind the 2024 Rule and reinstate the 2021 framework.

While the shift in DOL enforcement posture is welcome news for fitness studios, practitioners should advise clients to remain cautious. The 2024 Rule technically remains in effect for purposes of private litigation, and federal courts retain independent authority to interpret the economic reality test, particularly after the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), which eliminated Chevron deference.

The economic realities test looks at six guideposts: opportunity for profit or loss based on managerial skill, relative investments, permanence, control, whether the work is integral to the business, and skill and initiative. No single factor controls. For fitness businesses, the hard facts are usually control and integration: who sets the schedule, who controls substitutes, who fixes pricing and branding, who owns the member relationship, and whether the instructor is actually operating an independently established business or simply performing the company’s core service. The DOL’s point is that a contractor label and a 1099 do not answer that question; it is based on the facts.

Where State Law Differs with the ABC Test and Beyond

Federal law is only the floor. Several states apply far more restrictive classification tests, posing particular challenges for the fitness industry.

• Since the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018), and the subsequent codification of the ABC test in Assembly Bill 5 (AB-5), California presumes that all workers are employees. The burden falls on the hiring entity to prove that the worker: (A) is free from the company’s control and direction; (B) performs work outside the usual course of the hiring entity’s business; and (C) is customarily engaged in an independently established trade or occupation. Prong B is the killer for most fitness studios—a yoga instructor teaching classes at a yoga studio is performing work squarely within the studio’s usual course of business. Courts have confirmed that the ABC test may be applied retroactively, exposing studios to years of back liability.
• New York. New York applies a common-law control test for most employment law purposes but uses the ABC test for unemployment insurance. The New York Court of Appeals’ decision in In the Matter of Yoga Vida NYC, Inc. v. Commissioner of Labor, 28 N.Y.3d 1013 (2016), offered some comfort to studios. The Court held that non-staff yoga instructors were properly classified as independent contractors where the studio did not exercise sufficient control over the means and results of their work. The Court found that “incidental control,” such as setting the class schedule, collecting fees from students, and requiring proper licensure, did not warrant an employment finding. However, the Yoga Vida decision is narrowly fact-specific, and studios that exercise greater control over instructor conduct should not assume they would receive the same favorable outcome.
• New Jersey and Other States. New Jersey adopted its own version of the ABC test, and several other states (Massachusetts, Illinois) apply similarly restrictive standards. Counsel advising multi-state fitness companies must conduct a jurisdiction-by-jurisdiction analysis, as a classification structure that passes muster in Florida may create substantial liability in California or New Jersey.Pay Structure Pitfalls: Per-Class, Piece-Rate, and Commission Models

Even when a fitness studio correctly classifies its instructors as W-2 employees, the manner in which those employees are compensated can itself create significant wage-and-hour exposure. The fitness industry has developed several compensation models that, while common, can violate federal and state law if not carefully structured.

Per-Class and Per-Session Pay Is Not a Compliance Strategy.

Studios, gyms, and personal-training businesses keep reaching for the same idea: label instructors as 1099 contractors, pay them per class or per session (usually $25 to $200 or more per class), and assume the variable-pay model solves overtime. It does not.

This model is functionally equivalent to a piece-rate system under the FLSA, and it carries several compliance risks.

Failure to Compensate for All Hours Worked

Per-class pay structures typically compensate instructors only for the time spent teaching, often a 45- to 60-minute session. However, instructors routinely perform substantial compensable work beyond class time, such as creating workout plans and playlists, communicating with clients via text, posting about their classes on social media, attending mandatory staff meetings and continuing education sessions, preparing the studio space, and engaging in post-class client interaction.

If the instructor is a W-2 employee and nonexempt, the employer still owes minimum wage for all hours worked, overtime for hours worked over 40 in the workweek, and accurate records. The DOL’s regular-rate guidance states that all remuneration for employment is included unless specifically excluded by statute. That matters because incentive-heavy compensation does not eliminate overtime; it changes how overtime is calculated.

Even when compensation is paid on a piece-rate, salary, commission, or other non-hourly basis, overtime still must be computed from the employee’s regular rate. Paid per class is a compensation method, not a force field. Under the FLSA, all time during which an employee is “suffered or permitted” to work is compensable, and a per-class payment that ignores these pre- and post-class duties exposes the employer to minimum wage and overtime claims.

State law can be harsher. California’s ABC test presumes employee status unless the hiring entity proves all three prongs, including that the worker performs work outside the usual course of the hiring entity’s business. New Jersey uses a similar ABC structure and puts the burden on the employer to prove all three elements once remunerated services are shown. For a studio or gym whose business is selling instruction, training, or classes, that “usual course” prong is where many 1099 models start to wobble.

Minimum Wage Compliance

When total compensation for a workweek is divided by total hours actually worked (including non-teaching time), the effective hourly rate may fall below the applicable minimum wage. This is particularly acute in states with high minimum wages, such as California ($16.50/hour as of 2025) and New York ($16.50/hour in New York City as of 2025).

Overtime Calculation Complexity

Under FLSA regulations (29 C.F.R. § 778), an employee paid on a piece-rate basis is entitled to overtime calculated by dividing total weekly earnings by total hours worked to derive the “regular rate,” and then paying an additional 0.5 times that rate for each hour over 40. Studios that pay per class without tracking total hours often fail to calculate total hours, resulting in overtime violations. Complicating matters further, many fitness instructors receive different rates for different class types—a Pilates reformer class may pay more than a mat class, and a personal training session may pay a percentage of revenue—requiring careful aggregation of all compensation when computing the regular rate.

That is why per-class, per-session, per-client, or piece-rate/piecemeal plans are not unlawful per se. Federally, they are non-hourly pay methods that must still be converted to a regular rate. Under 29 C.F.R. § 778.112, when an employee is paid a flat sum for a particular job, the regular rate is the week’s total pay divided by total hours actually worked, with extra half-time due for hours over 40. Under 29 C.F.R. § 778.111, piece-rate pay works the same way: total weekly earnings divided by total hours, followed by the additional overtime premium. The practical point is straightforward: the 50-minute class is not the whole workday if the instructor also spends time programming, setting up, cleaning, texting clients, or attending required meetings.

Commission-Based and Revenue-Share Models

Some studios, particularly personal training operations, compensate instructors as a percentage of revenue generated from their clients.

Commission and revenue-split plans deserve separate attention because some clubs try to fit them into FLSA section 7(i) – the sales and retail exemption, which allows certain sales and retail employees to be paid solely commission. That exemption can be useful, but only if the employer can satisfy all three requirements the DOL identifies: the employee must work for a retail or service establishment, the regular rate in overtime weeks must exceed 1.5 times the applicable minimum wage, and more than half of the employee’s earnings in a representative period must consist of commissions. The DOL’s 2005 opinion letter (FLSA2005-53) addressing health and athletic clubs concluded that such clubs may qualify as retail or service establishments and that trainers, aerobic instructors, and similar staff paid flat amounts or percentages for lessons may satisfy section 7(i), depending on the facts. But the opinion letter also warns that a commission plan is not bona fide if the employee, in fact, always or almost always earns the same fixed amount each week.

The DC Attorney General’s 2023 enforcement action against Ultimate Performance Fitness (“UP Fitness”) illustrates the risk. UP Fitness claimed it paid personal trainers using a bona fide commission structure, but the OAG’s investigation determined that the commission label was a sham. The trainers were not compensated for required non-session work, including creating custom workout and meal plans, writing biweekly progress reports, responding to daily client messages, and attending mandatory meetings. They must have worked dozens of uncompensated overtime hours. UP Fitness paid $450,000 in restitution and penalties and was required to overhaul its compensation structure.

In sum, the right answer is not “never use commissions.” The right answer is that the commission plan must be real, the hours records must still exist, the representative period must be documented, and the compensation data must actually prove that more than half of earnings came from bona fide commissions. A “commission” label slapped on what is functionally per-session pay is a litigation accelerant, which is why the UP Fitness settlement’s reference to an improper commission structure is so useful as a warning shot.

Hybrid and Tiered Structures

Many studios employ hybrid compensation models: a base per-class rate supplemented by attendance bonuses, tiered pay based on class fill rates, or separate hourly rates for non-teaching duties. While hybrid models can improve compliance if properly designed, they increase the complexity of calculating the regular rate for overtime purposes.

A further emerging issue is whether time spent on social media client engagement constitutes compensable work. When a studio requires or expects instructors to maintain a social media presence, respond to client DMs, and promote classes on Instagram, the time spent on those activities may constitute hours worked under the FLSA, and failing to account for it can compound minimum wage and overtime violations.

The Litigation Landscape: Notable Cases and Enforcement Actions

Lawsuits in the fitness space continue proving the same point. In Roth v. Life Time Fitness, the District of Minnesota, No.:2016cv02476 (D.C. Minn), the court approved a $725,000 settlement of claims that group fitness instructors were not compensated for work done before and after their classes.  In Reulbach v. Life Time Fitness, Inc. et al. No. 1:2021cv01013 (N.D. Ohio 2021), a fitness instructor alleged unpaid time for required team meetings, equipment cleaning, telephone calls to members, and online health-and-fitness learning, which allegedly resulted in unpaid overtime; the court dismissed the case in favor of arbitration, but the allegations illustrate the compliance gap. CorePower Yoga Osterholt, LLC, No. 1:2016cv05089 (N.D. Ill. 2017), settled for $1,492,500 after allegations that interns and instructors were paid for time in the studio but not for several outside-the-studio responsibilities.

Wage and hour litigation targeting the fitness industry has accelerated in recent years, driven by the post-pandemic return to in-person fitness and a well-resourced plaintiffs’ bar. Below is a survey of significant matters.

Equinox Personal Trainers: $12 Million Settlement

In Katz, et al. v. Equinox Holdings, Inc., No. 20-CV-9856 (S.D.N.Y. 2020), one of the largest fitness industry wage settlements to date, a New York federal judge approved a $12 million class action settlement between Equinox and its personal trainers, resolving a years-long dispute over unpaid overtime. The class included all personal trainers who worked for Equinox in New York between March 2014 and July 2024. The trainers alleged that they were paid a flat hourly rate without overtime premiums, and that the company failed to compensate them for off-the-clock tasks, including program planning, gym equipment reorganization, and client outreach. The settlement fund covered an estimated 102% of the calculated back pay, effectively making the class whole.

SoulCycle: The Per-Class Pay Paradigm on Trial

In Oram v. Soulcycle LLC¸ 979 F. Supp.2d 498 (S.D.N.Y. 2013), a former SoulCycle master instructor filed a class action in the Southern District of New York alleging that the company violated New York and California wage laws by compensating instructors only for the approximately 45 minutes of class time. The complaint alleged that instructors were required to spend dozens of additional hours per week on training, class preparation, playlist development, client communication, marketing support, and mandatory meetings, none of which was compensated. The case focused national attention on the per-class pay model prevalent across boutique fitness. According to SEC filings, the New York action was dismissed, and the California claims were settled on a single-plaintiff basis for approximately $100,000, inclusive of attorneys’ fees. While the monetary resolution was modest, the litigation put the entire industry on notice regarding the legal risks of per-class-only compensation.

DC Attorney General v. UP Fitness: $450,000 Settlement

As discussed above, the DC OAG’s investigation into UP Fitness resulted in a $450,000 resolution in November 2023, comprising $254,190 in restitution to more than 30 personal trainers and $195,809 in penalties assessed against the District. The matter stands as a cautionary tale about the use of commission labels to disguise non-compliant pay practices. Attorney General Schwalb stated that the settlement was intended to send a message that businesses “can’t use sham commission compensation structures to shirk their legal obligations to workers.”

Yoga Vida NYC: A Defense Win, With Caveats

There is, however, a defense-side case worth knowing, so the discussion is not one-sided. In Yoga Vida NYC, Inc. v. Commissioner of Labor, No. 130 (N.Y. Oct. 25, 2016), the New York Court of Appeals reversed an agency finding of employment in an unemployment-insurance case involving non-staff yoga instructors. The court emphasized that the instructors set their own schedules, chose their pay (hourly or percentage-based), were paid only if enough students attended, could teach at competing studios, and were not required to attend meetings or training. But that opinion was record-specific and arose in the context of unemployment. It is not a blanket approval of 1099 yoga teachers under the FLSA, the NYLL, or the ABC-test statutes.

The New York Court of Appeals’ 2016 decision in Yoga Vida NYC, Inc. remains one of the few appellate-level victories for fitness studios on the classification question. The Court reversed the Unemployment Insurance Appeal Board’s finding that non-staff yoga instructors were misclassified, holding that the studio’s exercise of “incidental control”—publishing a master schedule, providing studio space, collecting student fees, and requiring proper licensure–did not establish an employment relationship. However, the decision was based on the common-law control test applicable to unemployment insurance, and its reasoning may not translate to FLSA or state wage-and-hour contexts that apply different analytical frameworks.

California examples are even more instructive because the wage claims tend to stack. In the Equinox California matters, Equinox agreed to pay $36 million to resolve combined class and PAGA claims. The class notice states that the case alleged failure to pay for certain hours worked, failure to provide meal and rest breaks required by California law, wage-statement violations, and unpaid wages due at separation. The same notice also allocated 65% of the net settlement amount to workers who held positions such as personal trainer, Pilates instructor, or group fitness instructor. That is what happens when off-the-clock theories are paired with California break and pay-statement claims.

California adds another trap. If a per-class or per-session plan functions as pay by task or unit, counsel should assume piece-rate issues are in play. The California DIR’s guidance on Labor Code section 226.2 states that rest and recovery periods must be compensated separately from piece-rate compensation at the higher of the average hourly rate or minimum wage, and that the employer may not treat the piece-rate as including that time “no matter how the piece-rate was determined.” The same guidance states that “other nonproductive time” must be paid separately at no less than minimum wage unless the employer uses the statutory safe harbor of paying at least minimum wage for all hours worked in addition to the piece-rate compensation.

That matters because many studio compensation systems pay only for the billable unit while ignoring everything around it: room setup, attendance logging, member questions, post-session follow-up, supervisor communications, and mandatory meetings. In the Equinox California pleadings, for example, plaintiffs alleged off-the-clock work that included communicating with clients, creating client programs, responding to supervisors, and scheduling work meetings, as well as overtime, meal-period, rest-period, and related claims. In California, those facts do not merely create unpaid-wage exposure; they can also give rise to separate premium-pay, wage-statement, waiting-time, and PAGA theories.

Practical Compliance Guidance for Employer’s Counsel

Attorneys advising fitness industry clients should consider the following compliance strategies:

1.     Conduct a Classification Audit.  Analyze every instructor relationship under the applicable federal and state tests. For each instructor, document the degree of behavioral and financial control exercised by the studio, the worker’s investment in their own business, the permanence of the relationship, and whether the work is integral to the studio’s business. In ABC-test states, give particular attention to Prong B; instructors teaching the studio’s core classes will rarely pass. Where classification risk is high, consider reclassification to W-2 status, which may be less costly than defending a misclassification action that triggers back taxes, penalties, liquidated damages, and attorneys’ fees.

2.     Track All Hours Worked. If instructors are employees, their hours must be tracked, including non-teaching time. Implement timekeeping systems that capture: class teaching time; pre-class setup and post-class breakdown; mandatory meetings, trainings, and continuing education; client communication and administrative duties; and social media and marketing activities if required or expected by the studio. Without accurate time records, the employer cannot demonstrate compliance with minimum wage or overtime laws and will be at a severe disadvantage in litigation.

3.     Structure Per-Class Pay for FLSA Compliance. Per-class pay is not inherently unlawful; the FLSA permits piece-rate compensation, but it must be structured to ensure compliance with the minimum wage and overtime requirements for all hours worked. Consider supplementing per-class rates with a separate hourly rate for non-teaching duties, or establish a minimum weekly guarantee that accounts for total anticipated hours. Ensure that the regular rate calculation for overtime purposes aggregates all forms of compensation, including different per-class rates for different class types, bonuses, and attendance incentives.

4.     Avoid Sham Commission Designations. As the UP Fitness matter demonstrates, labeling a compensation structure as “commission” does not make it so for purposes of the FLSA. If claiming the Section 7(i) retail/service establishment exemption, verify that the employee’s regular rate consistently exceeds 1.5 times the minimum wage and that more than half of the total compensation is commission-based. Document the basis for any commission calculation and ensure that all hours worked, not just client-facing sessions, are compensated.

5.     Prepare for Multi-State Complexity. Franchise and multi-location fitness brands must navigate a patchwork of state classification and wage-and-hour laws. A classification model that is viable in Florida or Texas may be untenable in California, New York, or New Jersey. Develop state-specific compensation structures and engagement agreements, and build jurisdiction-specific compliance reviews into expansion planning.

6.     Address the DOL Transition Period. With the DOL’s February 2026 NPRM seeking to reinstate the 2021 independent contractor rule and rescind the 2024 Rule, the regulatory landscape remains in flux. The comment period closes April 28, 2026. Even as DOL enforcement has softened, private plaintiffs and state attorneys general remain active. Advise clients to use this transition period to shore up compliance rather than to relax classification standards.

Takeaways

For most fitness businesses, the defensible model is to put instructors on W-2s, treat them as nonexempt unless a real exemption clearly applies, require accurate timekeeping for all work, and layer class, training, or sales incentives on top of a compliant base-pay system. If the client insists on a 1099 model, the file should be built around actual entrepreneurial independence, not adjectives: meaningful control over pricing or compensation choices, nonexclusive relationships, separate investment, portable clientele, and limited company control over the means of performance. Even then, federal law may disagree, and state law may be stricter still.

The recurring industry mistake is confusing how the instructor is paid with who the instructor is. Per-class, per-session, per-client, salary, split, draw, or “commission” are compensation mechanics. They do not answer the real wage-and-hour questions: employee or contractor, exempt or nonexempt, all hours worked or only client-facing time, regular rate included or ignored, and—if California is in the mix—what exactly is paid for rest, recovery, and nonproductive time. That confusion is why the fitness industry keeps producing class actions, agency investigations, and seven- and eight-figure resolutions.

For employment counsel, the takeaways are clear: classification decisions must be driven by the economic realities of the relationship, not the administrative convenience of the 1099 form; per-class and piece-rate compensation models require careful structuring to account for all compensable hours; and the state-law landscape, particularly in ABC-test jurisdictions, demands independent analysis that cannot be short-circuited by reliance on federal standards alone. The fitness studios that invest in compliance now will be far better positioned than those that wait for the demand letter or the DOL investigator to arrive.