This California Law Could Have A Huge Effect On Your Salon
You might have heard about a recently passed law in California (AB 1513) that requires salon owners to reconsider the way they pay their employees. It’s a complicated law, so we talked to the Professional Beauty Association to break it down for you. See if you need to worry and what you should do.
What is this law and why do I need to know about it?
The law focuses on “piece rate” workers. In California, a worker is paid by piece rate if he or she earns a fixed amount for each “piece” of work completed. Stylists who are paid a flat amount for each service (for example., $50 per haircut) or a percentage of the revenue earned from their work (for example., 45 percent of all money earned) are considered piece rate employees. This is true even if the employer and the employee call the pay a “commission.”
California law requires that “piece rate” employees be paid separately for their “nonproductive time” and their paid “rest and recovery periods.” Court decisions in California have held that these separate payments are necessary in order to ensure that employees are paid for all of their working time, not just the time they spend making pieces (or in this case, cutting hair).
In order to ensure compliance, salons should make sure that employees are being paid at least the minimum wage for all working time. In addition, salons who pay by piece rate must determine their employee’s regular rate of pay on a weekly basis (by dividing total compensation earned by the total number of hours worked) and then ensure that employees are paid that regular rate for all rest periods. This is a tedious and time consuming process but, unfortunately, is necessary for all employers who use a piece rate system.
I heard I have to pay my employees back pay under this law. Is this true?
AB1513 itself does not require that employers make back wage payments to their employees. It did offer employees who signed up by July 1, 2016 a one-time opportunity to pay back wages and avoid certain penalties. If a salon didn’t meet the deadline, then it cannot take advantage of the AB1513 backpay option.
It is possible that some salons will be sued by employees claiming wages owed. AB1513 does not create liability and, just because employees might bring a claim, does not mean that a salon is liable. Some defenses might be available. If your salon is unfortunate enough to be named in a lawsuit, PBA recommends that you find experienced labor and employment counsel as soon as possible so that you can learn about your options.
Are my independent contractors actually piece rate employees?
It depends. If you work with independent contractors and those contractors have been properly classified, then the piece rules do not apply to them. If, however, your independent contractors are really misclassified employees, the piece rate rules likely do apply.
Independent contractor classification is difficult. The California Division of Labor Standards Enforcement considers many factors to determine which category a worker falls into and there are no absolute rules that apply across the board. There are risks for salons that mistakenly classify their employees as independent contractors, so PBA recommends that, if you use independent contractors, you ask your legal advisor to review whether they are properly classified.
What is “nonproductive time” and why would I have to pay my employees for it?
Nonproductive time is basically time your stylists are at work, on the clock, but not directly related to the main piece rate work the employee was hired to do. The line between productive and non-productive time is ill-defined. Things like sweeping up after a haircut, waiting for a client, attending meetings and restocking shelves could be considered nonproductive time. In order to ensure that all time is paid, PBA recommends you implement an hourly pay system that pays employees the minimum wage for all time worked. You can then pay a commission over-and-above the earned hourly rate. If you do not already have a time clock (or other method for tracking employee work time), you should obtain and use one as soon as possible.
What about “rest and recovery” time?
California law requires that all employees be provided with a rest and recovery periods of 10 minutes for every four hours worked—and that these periods be paid. In order to comply with the law, you need to make sure your employees have a chance to take their rest and recovery periods and that they are properly paid for them. In a piece rate system, you must determine each employee’s “regular rate of pay” on a weekly basis by dividing that person’s total earnings in a week by his or her total hours worked. Once you have determined the rate of pay, you must pay the employee for their rest periods at the determined rate. This process must be completed on a weekly basis.
I rent my chairs to stylists. Do I need to worry about this law?
If your “renters” are properly classified as independent contractors, then they are not employees and you do not need to observe the piece rate rules for them. As discussed, however, some renters can be reclassified as employees (for example, if the salon has a lot control over the workdays and it otherwise appears that they are not truly independent). If you rent chairs, you should get a legal review of your practices to make sure that you aren’t accidentally employing workers who you believe are independent contractors.