Peter Widmayer and Lisa Wolf from Club Capital led an essential webinar addressing one of the most common questions facing youth soccer clubs: should coaches and staff be classified as employees or contractors? This decision carries significant financial and legal implications that every club leader must understand.

The Legal Framework

The IRS defines employees as individuals whose work the club controls both in terms of what will be done and how it will be done. Contractors, conversely, are independent professionals who offer services to the general public and control the result of their work rather than the methods used to achieve it. The critical differentiator is the level of control the organization exercises over the individual.

Three Key Classification Factors

The IRS uses three primary factors to determine proper classification:

1. Behavioral Control: Does the club dictate how work is performed? This includes providing session plans, mandating specific formations, or requiring adherence to standardized curricula.
2. Financial Control: Does the club reimburse expenses, provide equipment, or pay consistent monthly amounts? These factors suggest an employee relationship.
3. Relationship Type: Are there written contracts, handbooks, vacation policies, or benefit offerings? Multiple formal relationship elements indicate employment status.

Practical Applications by Role

Club Directors/Administrators: Nearly always employees due to direct oversight responsibilities, consistent salary structures, and comprehensive job descriptions.

Coaches: The gray area where most classification questions arise. Coaches with their own LLCs who serve multiple clients lean toward contractor status. However, coaches receiving year-round pay, following club-mandated curricula, and signing comprehensive handbooks typically qualify as employees.

Physical Trainers/Referees: Usually contractors since they’re licensed professionals with established practices, bring their own equipment, and aren’t controlled by the club regarding their methods.

Financial Impact

The cost difference is substantial. Switching from contractors to employees adds approximately 8% in payroll taxes to compensation costs. For a typical $350,000 revenue club spending $122,000 annually on coaches, reclassification would add $10,000 per year—a significant burden for organizations typically operating on thin margins.

Additional employee-related costs may include:

• Workers’ compensation insurance
• Unemployment insurance
• Health benefits (state-dependent)
• Disability insurance

Real-World Consequences

Peter shared a sobering example from Maryland where a club was required to pay two years of back payroll taxes after the state determined their coaches should have been classified as employees. For smaller organizations, such unexpected expenses can be financially devastating.

State Variations

Classification enforcement varies dramatically by state. California and other West Coast states actively monitor sports organizations, while states like Texas and Florida have minimal enforcement. However, federal IRS guidelines apply everywhere.

Risk Management Strategy

Rather than advocating for one classification over another, the presenters emphasized making informed decisions with proper documentation. Clubs should evaluate their specific situations against the three-factor test and ensure they can defend their classification choices.

The webinar concluded with practical advice: use payroll platforms even for small numbers of employees, maintain proper documentation, and consider consulting the IRS Form SS-8 for official classification determination when uncertainty exists.