The $99 scuba course question

[boulderjohn]

Is there anything you DONT teach John? Lmao.

When you get really old, you have had time to do pretty much everything.

 

[stuartv]

I can not see how a dive master could legally be considered an independent contractor. In general, if you are under the control or direction of another then you are an employee.

I disagree. I worked for years as an independent contractor at a state agency in Florida. I was full time in the office and under direct supervision of a full time employee. It's called being a 1099 employee. It's still an independent contractor.

Being a DM that does nothing but come in and act as an AI every couple of months, for a set fee, as a 1099 employee is still, clearly (in my mind) an independent contractor.

 

[boulderjohn]

I disagree. I worked for years as an independent contractor at a state agency in Florida. I was full time in the office and under direct supervision of a full time employee. It's called being a 1099 employee. It's still an independent contractor.

Being a DM that does nothing but come in and act as an AI every couple of months, for a set fee, as a 1099 employee is still, clearly (in my mind) an independent contractor.

There is more to being a 1099 contractor than the person contracting with you saying that you are a 1099 contractor. There are specific rules for it, and in my experience, those rules are often ignored. I would bet there are a whole lot of independent contractor instructors who fall pretty clearly under the IRS definition of an employee. The advantage is pretty much completely in favor of the employer.

 

[RJP]

All your math fails to take into account that a shop might be taking a loss. It's called a loss leader. They are used to draw people in and make money in other ways. Done correctly, they are clearly sustainable.

Also as ams pointed out, I stipulated clearly that a $99 class included extra costs for the student, paid to the shop.

Thanks for the marketing lesson. I had no idea what a loss leader is.



I think, though, that where the scuba industry is at a loss (see what I did there?) is that they're not doing all that well at the whole "make money in other ways" department.

You see, the "loss" part is easy. It's the "leader" part that perhaps you don't understand. In my limited 25yrs experience in marketing and advertising a loss leader has always been a "leading" product or service in terms of being a high-volume, frequently purchased, staple, or non-discretionary product. A product that many people buy... often. Think milk, eggs, rice at the grocery store. Socks/underwear at a department store. Tylenol (one of my largest clients years ago) at a pharmacy.

There are tons of academic publications supporting the concept that for a "loss leader" strategy to work effectively it needs to be a repeat purchase item - or a highly-desirable yet scarce item - otherwise the consumer has no idea that the price is a particularly motivating bargain. And even then, it's an iffy prospect.

EconPapers: Why promotion strategies based on market basket analysis do not work
EconPapers: Direct and Indirect Effects of Retail Promotions

A correctly implemented loss leader strategy also requires that the "loss" period be for a limited, strategically opportune time. For example Target will deeply discount deodorant and soap the week before Memorial Day, Fourth of July, and Labor Day. Why? Because those things are located right next to the high-price, high-margin displays of sunscreen. WalMart uses pencils and notebooks as loss leaders during back-to-school sales so that moms come in and also buy their kids clothing.

Nobody can discount a primary product/service (esp one that has a once-in-a-lifetime consumption pattern) ALL THE TIME as a sustainable strategy.

In marketing we don't call that a "Loss Leader" strategy... we call it a "Going Out Of Business" sale.

 

[redacted]

I doubt if shops or any of the shop personnel involved lose money on a $99 OW course. I suspect it is a matter of low profits are better than no profits.

 

[RJP]

I doubt if shops or any of the shop personnel involved lose money on a $99 OW course. I suspect it is a matter of low profits are better than no profits.

Even at a true loss there might be some hoped-for "live to fight another day" cash-flow benefit.

 

[flyin01]

There is more to being a 1099 contractor than the person contracting with you saying that you are a 1099 contractor. There are specific rules for it, and in my experience, those rules are often ignored. I would bet there are a whole lot of independent contractor instructors who fall pretty clearly under the IRS definition of an employee. The advantage is pretty much completely in favor of the employer.

This was my point exactly. I dont hear many complaints from DMs or instructors about their pay but if the rules were inforced that would shake things up a bit.

 

[ams511]

There is more to being a 1099 contractor than the person contracting with you saying that you are a 1099 contractor. There are specific rules for it, and in my experience, those rules are often ignored. I would bet there are a whole lot of independent contractor instructors who fall pretty clearly under the IRS definition of an employee. The advantage is pretty much completely in favor of the employer.

I agree with John. While the rules are not totally clear cut, they are specific enough that I would be confident a divemaster would be considered an employee under both common law and IRS regulations. In the past the IRS has targeted Gentlemen s Clubs for violations of withholding rules. The clubs claimed the dancers were independent contractors and they are not required to without taxes or pay payroll taxes on them. In many cases the dancers paid the club to dance, provided their own costumes, signed a contract, etc. The main question was, "Did the club tell you what to do and control when you worked"?

---------- Post added April 2nd, 2015 at 02:32 AM ----------

Who is going to sue whom? For what? What law firm is going to take this case on?

You'd have 2-3 DMs here and there suing hundreds of small mom-and-pop retail dive shops for a few hundred dollars each. Impossible to get the DMs certified as a class because there's no common defendant or tort. And even if you could, there's not enough of them for a class-action firm to even put a paralegal on the case for an afternoon. They make their money by finding 10,000,000 people that are each owed $10 an Apple or GM or AT&T and then settling for $6/person and collecting 1/3rd of the $60,000,000 settlement.

Litigation could start from a variety of sources.

1) Complaints to wage/hour division of the department of labor. (i.e. think NFL cheerleaders).

2) Attorneys trolling for plaintiffs. There are many ads in Miami for attorneys looking for these cases.

3) IRS investigation. In the past the IRS has investigated many industries where abuse was prevalent. Also the IRS could be tipped off by someone that doesn't want to pay their self-employment taxes. The IRS can and will investigate and make the employer pay.

4) Civil Litigation. A divemaster gets sued and the shop claims they have no association with him because he is an independent contractor forcing a judge to decide.

 

[Pullnglide]

When I first started teaching independently I would do classes for $200 just to gain experience but I know it to be a fact that people who now pay my full price for any course will show up on time, pay attention and can be alot easier to work with. Just from my experience the students I've had that I cut the price for show up late if they show up at all and just don't respect the nature of diving. Not all were like that but the majority were, it's just kind of like they had a little extra money so they figured they would look into diving without much thought. I don't know why this is but its true at least for me it was. I now own a shop and have no idea how someone would profit for a $99 course unless the book, PIC, entry fees etc..are not included. We just charge one price for everything to make it easier.

 

[ams511]

My course was structured like this (in 1991). The $99 dollars was for the class/pool sessions and was marketed as an intro to scuba/refresher. The student needed to provide (but did not need to purchase) a mask, snorkel, fins, and weight belt with 6 lbs of weight. The book was purchased separately. Now here is where they get you (or me).

The check out dives were $99 PLUS you needed to either rent their gear ($35 x 2) or use gear purchased from them. Your c-card fee was additional. There was a huge push to buy gear from them. In fairness all the costs were disclosed up front. Also it was a rather long course, from what I remember we did class work on Tuesday and pool work on Thursday.

The $99 up front for the coursework/pool sessions may not be a bad deal for the shop because it can help generate traffic both from new divers and rusty older ones.