This topic pops up in my inbox so often, I thought it might be a good idea to write an article directed towards salon owners so that they can better understand exactly what an “independent contractor” is.

An independent contractor is:
* self-employed
* self-managing
and
* responsible for their own employment tax.

An independent contractor is NOT:
* exclusive to your business (regardless of what your “contract” stipulates)
* to be held to the terms of any kind of “non-compete” agreement
or
* an employee that you don’t have to accept tax responsibility for.

The consequences you, as a salon owner, could face if you are found to be improperly classifying employees as independent contractors are incredibly serious. You can (and will) lose everything you have if you are caught (which you will be). The amount of money you save in employment tax by cheating the government is far less than the amount you would be penalized in the event of an investigation and its subsequent audit.

It. is. NOT. worth. it.
Seriously.

Owners have lost their businesses, their homes, and have been put so far into debt for back taxes, fines, and legal fees that they will never live long enough to pay it off. Let’s not get into what could happen if your “independent contractors” decide to take you to civil court or report you to the Department of Labor. In addition to the drama from the IRS and your state labor board, you’ll have to answer to a judge and pay damages against the people you’ve wronged.

There is literally only one legitimate scenario in which a salon owner would utilize the independent contractor: an on-call employee.

An “independent contractor” is the on-call massage therapist that only comes in to do a few clients when your full-time therapist is overbooked and can’t take walk-ins. This on-call therapist comes in, does the work and leaves. She does not sit in the salon and wait for clients. She does not fold your towels, answer your phones, or scrub your toilets. She does massage. That’s it. You do not dictate to her how you want the services performed. She works wherever she’s called to work at her discretion. She is not and will never be exclusive to you unless you put her on your payroll and make her a legitimate staff member (which means she fills out a W2 and you assume responsibility for half of her employment tax). You pay her before she leaves the salon and at the end of the year (if you’ve paid her more than $500 in that year) you provide her with a 1099 she can file her taxes.

It can be very tempting to classify your staff as independent contractors and have them sign contracts that effectively makes them your employees. I get it, you don’t want to pay employment tax or be held to federal/state labor laws. Take my word on this: don’t do it. Not even once. In the long-term, you’re screwing them and you’re really screwing yourself.

If you are going to completely disregard my advice, at least treat the contractors properly.
*They do not have a dress code.
*They do not follow a code of conduct or any kind of “employee manual.”
*They do not sit in your salon all day, they come and go as they please.
*They are not exclusive to your business.
*They are not your employees. They do not clean, they do not answer phones, they do not do your laundry. They do what their job title entails, nothing more, nothing less.
*They do not sign your “employment contracts” that limit their rights as a self-employed person.

Too often I get messages from owners asking how they can “work around” the IC status through clever contract manipulation. To those people, I have two questions:
1.) What the hell makes you think I’m going to help you take advantage of your staff when I’m clearly an advocate against that shenaniganry?
2.) Do you want to incriminate yourself? Because that’s all you’ll be accomplishing.

Having your independent contractors sign “non-compete” agreements or “conduct” agreements is probably the stupidest thing you could do. These agreements can be used by that contractor to prove that you were overstepping your bounds into an “inappropriate degree of control” area which is only suitable in an employee-employer relationship. I’ve had more than a few owners tell me, “But they signed it! Aren’t they required to adhere to it since I have their signature on it?”

…no. They aren’t. You broke federal law, simpletons. The fact that the contractor agreed to your tyrannical contract before they realized they were getting hosed will hold no weight with a judge, who will see you as an opportunistic, greedy owner (since you are clearly the only person benefiting from that arrangement). They will look at you and say, “You are the business owner. You should have known better. Your ignorance of the law is no excuse and doesn’t enable you to violate it at will. If you weren’t aware of how to classify your staff, you shouldn’t have opened a business to begin with.”

Straighten up, salon owners. The IRS and the DOL are coordinating efforts against those of you that are misclassifying. They don’t care if it’s accidental or not. You’ve been warned.

78 COMMENTS

  1. Everything in this article is spot on……the problem we are having at the moment at our shop is how to open this subject up for discussion with our owner. There is a fair amount of turmoil and passive aggressive tension coming from the salon owners towards the “independent contractors”. At our last meeting: we were told that yes we are independent contractors BUT if we want to be independent at THIS salon THEY are in charge of our schedules….. any advice?

    • I am a new owner and finding out the previous owner was doing exactly what you are describing. Rather than demanding new terms, I would suggest an open, frank, honest discussion. Reclassifying subcontractors as employees is easy. The problem is the math. Paying an added 10%+ in tax and insurance changes the business model and terms. Both sides have to be willing to change

  2. I would confront them with the rules from the IRS and say that what they are doing is illegal. Period. They can choose to keep from contracting you in the future, but if they do so, you can also choose to report them. If they’re so strong in their convictions, have them explain it to an auditor. That kind of disrespect should not be tolerated. It is unprofessional, unethical, and inappropriate. I wouldn’t stand for it.

  3. I’ve worked @ same salon for years as an employee with a 50% commission. We were just told that we are now independent contractors 70% but nothing else changes, we still buy no supplies (salon provides everything), one phone linefor everyone that works there , one credit card machine for everyone, at the end of the week we are given a check for what we did the previous week. I work 4 or 5 days every week (same schedule as usual) This just doesn’t seem legal Is it?

  4. It’s not legal. You cannot be put on a schedule as an independent contractor.
    Here are the factors the IRS uses to determine employee classification during disputes. If you read over them, you’ll see that many of those factors are present in your situation: http://www.avidtr.com/getattachment/Job-Seekers/Consulting-Options/1099-Contract/20-factor-test-for-independent-contractors.pdf.aspx

    If you search the term “independent contractor” in the blog’s search box, it’ll give you even more information about the classification and what to do about it.

  5. I am opening a small salon (not open yet) and i was deciding on hiring independent contractors. Before you judge me, hear me out. They are allowed to come and leave as they choose. I will always be there to clean and answer phone calls. They can work whereever else they want and have no dress code or code of conduct. The only thing I want for them is for all of them to sit together and discuss what days theyll be coming in so that theres no confusion and I dont have all of them there at the same time. I’m not settling anything. I just want them to determine it amonst themselves because i only have 4 stations for them and i dont want 6 stylists to be there at any point. However i understand there are hours in which noone wants to work so for those I would have an hourly paid employee. What are your thoughts on this method? I look forward to hearing from you. Also is it cool to have one emplyee and the rest as independant contractors?

  6. Since this post didn’t quite clarify how serious this is, I’ve written another that goes through the IRS guidelines for determining employment status. I strongly advise you against doing this. If you want to own a salon, OWN a salon. If you don’t want to own the salon, hire employees and find a manager or make the girls rent your spaces out. It makes absolutely no sense to hire them as independent contractors. Even with the freedom you’re planning on giving them, the IRS would not rule in your favor since you’re still breaking about ten of their twenty guidelines. You don’t have an understanding of the classification, since you can’t “hire” independent contractors. Independent contractors are “contracted” to perform a one-time job that is not integral to the business. They are not on your payroll, there is no continuing relationship. That goes directly against what you’re planning on doing. Trust me on this, it is a terrible decision. There are absolutely NO workarounds or loopholes to take advantage of here and magically make it legal.

    Here’s the article I wrote last week that goes way more into detail about this and why you should absolutely NOT use it.
    http://www.thisuglybeautybusiness.com/2014/05/the-20-factor-irs-test-why-independent.html

  7. I am classified under an independent contractor, but I have to ask my boss for permission to have vacations and if I can leave early or not. I know that I don’t get paid to clean, so i have not been cleaning so the boss put up a cleaning list because they noticed that I don’t clean. I am not sure if I should obey it or not because all the other nail techs here in my city they clean and work all day everyday. Even my step mom. I would feel like the only person to stand up to this out of hundreds of nail techs in my city… I wonder if its because the nail salon owners pay the nail techs here a little part in cash and the rest on a check. Is that why the nail techs are okay with following the owners rules? Or simply because they are unaware of the rules as an independent contractor? Because I am confused. I apologize if I don’t make any sense. I just got my nail license and when I started working and saw that i was getting taken advantage of and so are many other nail techs who have no idea. I also wonder if the nail owners have no idea what the difference of a 1099 independent contractor vs w2 employee is. What do you think about all this?

    • Many salon owners don’t understand the classification, but a good deal of them do and intentionally exploit their staff. You are definitely in a salon that doesn’t plays by the rules. Be very suspicious of “independent contractor” arrangements. Stay away from owners that utilize this classification altogether. It has no place in our business. If you search “independent contractor” on the blog’s search function, you’ll see a bunch of posts I’ve written that explain this in detail. I’ve also written a book specifically for people that are new to the industry that might help you immensely also.

  8. I love this website! Very informative and you are on top of it! My question is: As an Independant Contractor I carry insurance on my business but my owner insists and has put it in the contract that I MUST add the salon to my insurance even though they have their own. Is this legal?

    • Actually, that’s not only legal, it’s recommended. Also, it shouldn’t cost you anything additional. It’s just an extra layer of security that helps protect the salon owner and I advise them to make it a condition on their rental contracts. Likewise, their general liability insurance should cover you (and any other operator) in their building.

      • But IF I do have to pay extra, can I deduct the cost from my rent? If she wants me to add her on I don’t feel it should be at my expense.
        I also have another issue. I pay rent and share a room with another provider. The salon owner is bringing in yet a third person expecting me to work morning hours so that the other person can come in and work afternoon hours. I pay rent for half a day. I don’t feel I should be forced to choose a time slot so that she can bring in another person to make extra money. The third person should pick the days I will not be there. I have read through your comments and it seems this is not allowed. My contract is signed. Am I forced to comply with the owner?

        • You’re definitely not required to comply, especially if your lease doesn’t restrict the time your space is available to you. As far as the extra cost, if you are required to pay extra, you’ll have to talk to the owner about that. I have yet to come across a policy that charges more for “additional insured” but I suppose it’s possible. I certainly wouldn’t take on the added expense if there were one.

  9. Tina! You’ve been helpful! I can’t thank you enough for your informative blog!!!
    I am a contractor that is CLEARLY misclassified. As I am working on finding somewhere to relocate I am struggling with the moral battle of whether to confront my owner or simply file the ss8 form. (Would you advise finding an attorney before filing the form?) I have worked there for 5 years and I’d hate to disgust you with the details of how exploited I have become but now that I have built such a following for myself I am so frightened of negative word getting out about how I left the business. Do I bring up how she is carrying on business completely illegally despite the fact I have chose to leave or do I simply blind side the owner with the IRS? We live in a small town and I am so passionate about our business I am so SICK of seeing people taken advantage of (INCLUDING myself!!)… Thank you!!!!!!

    • Generally, I advise confronting the owner with the information first and giving them a chance to explain themselves and rectify the issue. A lot of owners simply don’t know any better. If the owner becomes defensive or argumentative or tries to bullshit you, you’ll know they did it intentionally–that would be the point to lawyer up, file the SS-8, and file a complaint with your local labor authority.

  10. I left my job just recently because I realized how bad my former boss was screwing me over. At first she was paying her portion of taxes on me (as well as other employees), but then she realized how much she was being taxed and decided to 1099 us. It was all fun and games until I realized how much I had to pay in taxes when I didn’t even have many deductions since she was buying most of the supplies. I was an employee, answering phones, cleaning, sitting there even if I didn’t have a client (not being paid) and yet had no benefits at all. Anyways, fast forward to recently, she started making a ton of changes like taking away access to my schedule, lowering my pay and even deducting $25 for heating on my paycheck. I decided to quit. I moved to another salon and I contacted my clients. (clients who had followed me from another salon) Well a few days ago I received a text message and an email from her basically threatening me because I signed an employee handbook in 2012 and I was soliciting salon clients to my new establishment. She also claimed that since my hubby is a court employee he could have had access to my client info (such bullshit) I only contacted clients who followed me, a few clients had actually contacted me because the owner is telling them that I am sick so they were concerned. The employee handbook that I signed in 2012 also states she was paying taxes on me. I would assume that anything that the handbook states would be void as soon as she stopped paying taxes? I’m not responding to her ridiculousness but I am turning her into the labor board, irs and who ever else I need to.

    • Well, as a disclaimer: I’m not an attorney–however, I do have a good deal of common sense and so do most judges. It’s my belief that your “employment arrangement” was terminated effectively when she decided to violate federal tax and labor laws by classifying you as “self-employed.” When you became self-employed, she stopped being your employer. Any agreement you made prior to that would be null and void. Because you were considered “independent” and self-employed, she had absolutely NO right to restrict your ability to freely ply you trade. I’d invite her to press charges. (“Do it–you won’t.”) However, you might be better off just ignoring her until you’re served with something. At that point, I’d laugh and wait for her to embarrass herself in court–oh, and definitely follow through with the IRS and DOL. For sure.

  11. Hi! I love this site ! I have a question .. I been working at this salon for 2 years I’m a 1099″ but know that I’ve done my research I m positive i should be a w2 !! I have to be in the salon Tuesday to Saturday 10-6 no hourly pay have to ask for days off and they have a set vacation time not paid and they they’ll me that’s the only one I can have if I want to go some other time I have to ask months in advance and maybe they think about it .. They pay me 50% and take off my check another 10% of my pay to cover products I use .. I feel very confuse I think is not right and they made me sign a contract saying that I can’t take any client info or I will get in trouble.. Please tell me if this is legal !!!!! Thanks so much

    • Definitely not legal. If I were you, I’d 1.) find another job that classifies appropriately and doesn’t commit wage theft, 2.) file an SS-8 with the IRS, and 3.) file a complaint with the state labor board.

  12. I have a big head ache, I recently relocated to another state, and in the process of getting my IC transferred. In the mean time I have ment with a salon owner and did an interview/fill of her nails, I had started moving my things in to the salon that I use, and was meeting with several people that would be maybe clients. One of the other IC started some drama and I tried to confront the owner and the other IC, but the owner said to just let it go, now the locks have been changed and the owner will not let me have my chair or light, plus a couple of small things. She said I owe her money for the last month, but I am not liciened yet so I don’t see how she can do this and how can I get my things back

    • Lisa, call the sheriff and tell them your things have been stolen (the proper name in your state may be something like “theft by conversion” or “theft under false pretenses” or “theft by deception”). She has no right to your belongings. If she truly believes you owe her money, she’ll have to take you to civil court, where she’ll also have to explain why you’re classified as an independent contractor and why you were hired to work without a license. Trust me, she doesn’t want to have to try to justify either of those things.

  13. For salon workers in this bind… there is a way around this. You contact the IRS! Look for IRS form SS-8, “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding .” You can also contact your local state employment board and ask them for a determination of your classification as a contractor vs. employee. This will almost certainly trigger a very unwanted audit of the salon owner’s records. If you are found to have been misclassified, that will get fixed. Just keep in mind that it’s possible such a thing could ruin the salon owner personally and/or professionally (such as with state licensing boards) — HOWEVER, consider this, too. Employers who misclassify their workers are BREAKING THE LAW. Do you really want to keep working for a criminal? Get your classification straightened out. It’s likely that you could be due back pay, among other things, depending on your situation. You may not have work anymore if the salon shuts down…. but then, aren’t you just putting a criminal out of business?

    • I don’t know who you’re asking, but I’ve personally assisted five misclassified independent contractors this year. They’ve each received judgments or settlements ranging from $6,500-$27,000 for back taxes and unpaid wages/overtime.

  14. I just recently got sat down and spoken to by my owners about working for another company. I work at a Blow Bar, when we started we were on hourly, then we were moved to be independent contractor. I did not sign any contract or anything stipulating I cannot work for anyone else. I am 21 and have been a hairstylist for 4 years, I may be young but I’m smart. My owners are basically firing me because I’m working for “a competitor” as they do the same thing they do. I am so upset and have no idea how to handle this. What should I do?

    • Well, you could file an SS-8 with the IRS and ask them to determine your employment classification. For more specific advice, you’ll have to talk to an attorney or labor authority in your area.

  15. I was labeled as an independent contractor when I was hired as an assistant. Yet I had be there everyday alongside the owner . I worked 8+ plus on weekends. I could not leave when I wanted to . here comes the good part. I was being paid $100 a week !!! And that’s with my tips added on to my check … If you do the math it’s $20 a day … I feel cheated after reading all this information. I quit after the third week because I could not live on that much on money … The system they were paying me on was per service I did but there was services I had to do that I would not get paid for. And if we had to do double process on a Client she would not pay me double for the service . My question is can I sue the owner for my money if I only worked there for 3 weeks ? . I also know other girls who were cheated and who worked there longer then I had who were payed the same way. Everyone quit .

    • You absolutely can, but you need records to prove that you’re owed the money (contracts, pay stubs, time sheets). You’ll need to talk to someone at your state’s labor authority (or an attorney) for more specific advice.

  16. When I was hired I was under the impression that I was an employee, then months later found out I’m an IC. But I can’t come nn go when I want, I get 40% commission, no overtime pay, no hourly wage to compensate if my commission doesn’t make minimum wage. We get treated as employees rather than IC. We’ve had a meeting with our boss and said if she wanted to control is than she should pay for our taxes and she said she didn’t have to and that she can control us because it’s her business. She said she also can’t pay us more because she wouldn’t be able to pay the bills. Also this last week they said if we still wanted our taxes taken out that they’d have to lower our pay to 35% to do so. That doesn’t make any sense. Also we had to close for a month because we moved locations and they took too long and we went without work for a month and didn’t get compensation or anything. We went broke and even though we are working now, we are so behind on our bills, and we’ve lost a lot of clientele due to the move, so our checks have decreased a lot and we’re not making minimum wage but she won’t make up for it. What should we do?

    • I’m not going to be nice right now.

      1.) Your owner is a fucking idiot. She has no business owning a business.
      2.) The translation of her little speech is this: “I don’t think I have to abide by the laws. My salon is a sovereign state and you are my slaves. I can’t pay you more because I don’t have a clue how to run a business. I spent all the money I should have paid you on a move while you guys sat on your asses at home without income because I don’t give a shit about you, so long as I get what I want.”
      3.) What should you do? Report her to the labor authority in your state and the IRS. Contact an attorney who specializes in employee rights. Get another fucking job. Immediately. Why give her any loyalty after what she’s done and how she views you as nothing more than tools to serve her? Fuck ALL of that.

      Seriously, this pisses me off. This woman needs to be shut down. It’s absolutely inexcusable irresponsibility and indifference. She’s a disgrace to our industry.

  17. I am an ICC I have worked at the Salon for 1 yr and did a lot to help build the clientel, I opening my own shop . Are they my clients or the shops

    • You likely were not actually an independent contractor, but a misclassified employee. If there is no standing employment contract prohibiting you from contacting the clients, the owner likely won’t have much legal recourse to stop you. However, I recommend that before you move you start an online portfolio instead of stealing the salon’s database. By soliciting clients, your owner may seek legal action against you–even if she doesn’t have a case, the proceedings could get very expensive.

  18. I started in a pr, protocol .ivate salon three years ago with a verbal agreement of 60% commission until I became established. Things were going…I thought numerous clients with me and was building a clientele. Let me apologize if this is lenthy. The owner also ‘hired’ a male stylist (I will call him Bob) on straight rental. The owner has decided she no longer wants renters and all stylist will be commission moving forward. There are 2 female who rent based on income percentage but they are very part-time. Also she left Bob on a set rental fee because the owner said ‘i don’t want to lose him’. The owner now states she never told me I could go rental which I know I’m not confused about because I never would have accepted commission because it was not my goal. Fast forward, owner promoted a stylist to manager and rules have been set down. Is, a chore board, a computerized booking program, central credit card machine, dress code, protocol on color, providing a set schedule, approved business cards with salon name (stylist pays), notifying receptionist if we are leaving…it’s endless all stylists are given 1099’s as far as I know. After 3 years I’ve accomplished nothing. I’m 54 years and I wanted this to be my last career move. Needless to say, my attitude got bad. When asked for a set permanent schedule signed in writing I requested the owner put in writing what she wanted things broke down. I had also rattled the cage when I had refused to sign an employee handbook. I didn’t refuse but asked “am I an employee or an independent stylist?”and the handbook went away. I was asked to remove my belongings and go work ‘elsewhere’. I’ve been locked out of accessing my clients info, salon locks where changed and I haven’t retrieved my tools. I really don’t want to go IRS DOL or EEOC.. oh and Bob does no clean up, reports to no one, charges half the price etc etc…I feel like I’m have no alternative, other than being a door mat, than to take action against the owner. Any advice??!?

    • First, I’d call the cops and report the owner for theft through conversion for locking you out of the salon and essentially stealing your work tools. Then, I’d go find a job in a corporate salon where you won’t get screwed by an owner who has no clue what the hell they’re doing. If you don’t want to deal with the IRS, that’s your choice, but I’d absolutely file an SS-8 with them–if not for your sake than for the sake of the misclassified stylists still working there. Honestly, over the last five years, I’ve really lost all confidence in privately owned salons (and I’ve been way too optimistic about them over the course of my 15 year career in this industry). At this point, I no longer endorse them as viable employment options for motivated stylists. Corporate salons have a lot of drawbacks, but those drawbacks are nowhere near the outright abusive tactics and slimeball bullshit private salon owners pull.

  19. Hi, hopefully I can get ur insight from a salon owner perspective. I recently added esthetician services in my salon. So I hired an anesthetic. She is more as a independent contractor in my opinion. She will only come in when appointments are booked thru the salon. she decides her schedule and she is not responsible for any side work. She will bring her own products. We are in negotiations right now, and we are not seeing eye to eye. I offered 60% (esthetican) – 40% (salon) and 70% – 30%(salon) if she uses her machines..example microdermabration. She wants 80% commission of each service, but might be willing to go down 70%. Now, since I have none experience in this field, salon covers.. electric, reception, AC, credit card charge, and taxes etc how can the salon make any money? I appreciate your opinion, I feel stuck, due to its hard to find anyone where I am and she wants the job. Thank you

    • Well, it’s a bad deal for both of you. You’d be making garbage and so would she once her employment taxes are accounted for. (If you do the math, her 70% is actually 54.7% because 15.3% of her income goes straight to her self-employment taxes. Once she pays for product, she’s not in a position that’s any better than if she were employed.) For you, it doesn’t make sense to provide her with that square footage for a measly 30%, especially since you aren’t able to tell her when to work, how to work, or what to charge. (Do you see how that’s a system waiting to be abused by either of you? Just don’t.)

      She needs to be paying rent, or you need to employ and manager her. If she wants a job, give her one. Pay her a flat rate plus a reasonable commission bonus based on her performance. Otherwise, if she wants that freedom, give her the space for a flat monthly fee. Have her sign a lease, then sit back and collect your checks on the first of every month.

  20. Hello. I am trying to make sense of what is happening to me. I have been reading all of these questions and comments here and it seems like I am being taken advantage of. I am an independent contractor, who receives a 1099 at the beginning of the year and only gets 50% commission but I am expected to bring towels home to wash because there is no washer and dryer in the salon. (Not my problem, but was doing it to help out as she would phrase it) There is no space for a washer/dryer because it is only a 4 chair salon. 2 booth renters and myself were given a letter to sign saying we would clean the bathroom, do the trash, etc.. They way it was put in the letter was it was “teamwork”. There aren’t even cleaning products to clean with. I have clorox wipes at my station for me and my station but I am NOT using them to clean the salon. The salon provides the chemicals for services, but no gloves. I have to have my own and I was told I am the only one who uses the barbicide and she doesn’t use it. Meaning go buy your own. If I am not mistaken, by law, we are required to have our combs emersed in disinfectant. I was also told to do my own advertising. I will not be doing that. The tipping point was yesterday. I was not feeling well and wanted to go home an hour before I would normally leave and she questioned me and told me I was supposed to be there until 5. When I confronted her in an email about some of the things that were bothering me, she basically told me I didn’t have to work there and told me I can come pick up my stuff tomorrow but then changed her mind and said I had two weeks to find another place. I am confussed and angry. What do I do?

  21. I run and on-location wedding hair and makeup company and everyone on my team is an independent contractor. They get paid 50% commissions, they send me invoices after every wedding, they choose which weddings they want to work, and they provide their own tools. I provide minimal training that is not mandatory, just if someone is having a challenge with something or wants to learn some new techniques. My team is the most important thing to me and my business and I wouldn’t want anyone thinking I am taking advantage of them. What do you think?

    • I think you’re in a very questionable situation. Personally, if I were advising you as a consulting client, I’d recommend employing them. It appears there’s plenty of separation clearly defining your roles, but arrangements like this make me nervous because I’ve seen what happens to people who are found guilty of misclassifying. The fact that you refer to them as your “team” makes me cringe and want to whisper, “No no, don’t call them that,” lol. My opinion on your individual situation is influenced by what little I’m seeing here, though. Let’s evaluate this under two different scenarios.

      Scenario 1: Your job is to coordinate events by providing staffing. The people you contract have their own businesses, wear their own branding, and cannot be confused for your employees at any point in the process. Customers either present you with a budget or you provide them with quotes from multiple contractors (MUAs, stylists, etc.), for them to choose from. You don’t tell them what to do, which products to use, how to do their job, what to charge for their services, or slap your branding on them or their clothing. They’re very clearly independent contractors.

      Scenario 2: Your job is to coordinate events by providing staffing and performing services yourself. The people you contract may not wear their own branding. You require them to dress in your uniform or according to your dress code. They’re instructed to present themselves as your employees. During events, you tell them what to do, how to do it, what to use, and what to charge. You oversee every aspect of what they’re doing as if you were their employer. You require them to train with you and attend mandatory meetings. They’re probably NOT independent contractors.

      Whether or not it’s “fair” is subjective. With such little overhead, they may be okay with what essentially equates to 34.7% commission (minus state employment tax if any applies, minus travel, minus product, minus equipment…minus, minus, minus). Self-employment is extremely expensive, but most people know that when they get into the business. They’re the ones who send you invoices. I’m assuming they set their prices correctly, otherwise they wouldn’t accept the contracts to begin with, but you’re the one who cuts their checks. Most business owners can feel when they’re not doing right by others, so I think if you were giving them a raw deal, you’d likely feel it too. Honestly though, people who care enough to ask aren’t the type to take advantage in the first place, so I’m sure you have nothing to worry about. 🙂

  22. I left a message last night after clearing my room I rent, and underwent 2 joint replacements, could not stand and work for 4 months, out of my 10, just getting back to a place where I am able to work more than 4 hours a day, spent $3.000 on advertising for 2017, and renovations, only to get a text for a 30 day notice, never 1 day late with check? My friend thinks I should sue, asked to talk in person and was told it was a done deal. Mad as hell, and sad, small ski resort, limited choices.

    • A text?! Seriously?! That’s so pathetic and unprofessional. However, if your lease allows the owner to terminate with 30 day notice, there’s probably not a whole lot you can do about it. Still, I’d consult with an attorney anyway since you invested so much in advertising and renovations. If I were you, I’d attempt to seek reimbursement.

  23. Thank you Tina, I don’t want to spend more money, and I asked her to give me a copy of the lease, said I had a three month agreement? She has not sent it to me…I did cancel my last check.

    • In the future, keep a copy of your agreement somewhere safe at home for your own reference. There’s no excuse for you not to have been provided with a copy.

  24. I opened my own salon and build a large clientele, I manage EVERYTHING in my salon and I bring my clients in however, because my clientele is huge I hired a hairdreser, she makes $1k a week commission based, I provide EVERYTHING, she just come in and work, she demands her paid but she dont want to comply with my schedule, neither she work on Saturdays because she dont want to, yet she brings up this law but when i offered to pay her hourly she ask for $60/hr I mean really, where us the fairness of building a business and literally giving it away to stylists, this law is BS, lots stylists now days take advantage of already stablished salons by taking away client they dont bring in, not because they di better service but mess up the industry by offering ridiculous rates, where is the fairness in that?

    • The law isn’t BS, it actually works in your favor. The problem is that stylists are fed a bunch of bullshit in schools about how they deserve huge percentages of gross sales and the ability to make their own hours. These laws KEEP stylists from taking advantage of your salon. When you employ them legally, they’re obligated to obey you or forfeit their position. You can require them to sign non-solicitation contracts to legally protect your business from client theft. Seriously, do your research and change your structure. NOBODY benefits from the IC status, least of all the salon owner.

  25. I work at a “booth rent” salon that does a lot of weddings, and my owner takes a commission fee off of the weddings we do for advertising (15% off the price)When we do the weddings she does not give us the money right away, she takes it off our booth rent at the end of the month. I do not like this, and wonder if its even legal? I don’t get a receipt at the end of the month documenting that I paid full amount of booth rent, bc it is “taken out” with the wedding parties. Id much prefer to just collect my money and then pay at the end of the month so I can have prof with my checks that I paid in full. I understand that either way I am paying booth rent, but it just seems shady to me, and a way for her to deduct more for her taxes. Adding to this, when I first started working here she supplied back bar and retail, somewhere along the lines she decided to add “back bar fee and a “retail fee” if you don’t sell over a certain amount of retail for the month. She also gives us a 1099 at the end of the year including our booth rent that she “Deducted” off from the weddings we did, products she bought for us to use on backbar that we sometimes get charged for. Am I crazy in thinking that some of this just is not right, or are these things okay?

    • Yikes. None of this is right. First of all, you need to be giving the owner the 1099 for the rent you’ve paid. She should be giving you a 1099 if she’s paying you more than $600 per year for these weddings that you’re doing freelance for her. The back bar and retail fee thing is really sketchy. If I were advising her, I’d tell her not to provide you guys with anything–period. If I were advising you, I’d tell you not to take anything from her. The sales quotas are entirely inappropriate. You’re not an employee of hers. You shouldn’t be expected to sell anything. You should read this post.

      • She is “paying” me by taking it off my booth rent, which is untracable. So technically I do get more than $600 a year from weddings, but if it “deducts” from booth rent, I never get the money in my hands. So, she should get a 1099 for booth rent from the booth renters?

        • You’ll want to consult with a tax expert on it, but it seems to me that both of you should be exchanging 1099s. You provide her with one for the rent, she provides you with one for the weddings. The income needs to be separate to streamline your taxes and accounting. Her deduction of the money from your rent may be convenient for her, but it’s not in either of your best interests.

  26. I own a booth rental salon, which I am a major stickler to sticking with the laws. My question is, I have a stylist, just starting out that wants to work out of my shop. She can not afford my booth rental fee, at this time. Can I make her a 1099, adhering to the laws…basically treating her as my other renters( I am a landlord, not a boss) and just take a %, daily of what she brings in? I really want to help her…just not sure the best way to do it. Thank you.

    • Nope. In 5 out of 6 IRS revenue rulings, they determined salon landlords who took a percentage versus a flat rate “employers.” I know you want to be generous, but it’s a bad idea that puts you at a legal disadvantage. Instead, consider offering her a lower introductory rate. (Honestly though, my opinion is that if she’s just out of school, she’s highly unlikely to succeed at rental unless she’s supremely talented at service execution and educated about self-employment. If I were advising her, I’d tell her to spend some time refining her skills, learning more about what it means to be self-employed, and building her reputation in the area before she even considers it–otherwise she’s extremely likely to fail, leaving you both at a loss.)

  27. Tina I recently started back to doing hair a couple days a week. The salon is giving me a 70% cut and I have to buy my own products, there is no contract, it’s a busy little salon and being I am doing her clients. I will be receiving a 1099 at the end of the year and also have to pay my own taxes. I have never had to file a 1099 before or buy my own products, I’m assuming I am an IC, I have started taking out my taxes and paying myself for products as well as paying myself, so is this legal ? Also where would I find templates for keeping records and logs for inventory and ordering, tax deductions ect, I’m a bit confused as were to start.
    Thank You

    • Yikes! Okay, so you landed on this post, but I have a few others that are better than this one HERE and HERE. They answer the questions you have regarding the IC status. As far as accounting software (if you’re going to be a legitimately self-employed microsalon owner), I recommend Quicken Home & Business. It’s what I use and while there’s a little bit of a learning curve, it makes daily accounting a snap. I also use Salon Iris, which is a salon management software. You may want to research both and see which will work best for you.

  28. I have a situation. I filled out a w2 at a waxing salon then they saud that its easier for me to be an independent contractor and they werent taking taxes out. But they payed me hourly. It was a mess working there and now i dont know what to do. Im also struggling to figure out booth rent. Since im now in a different salon and im to pay 25% so im not sure how to go about taxes as this is my first time doing this. !! HELP!

  29. I work for a salon where I fold towels, clean, it’s teamwork, my boss’ are bullies and so are the employees. I have to stay in the salon until they say I can leave, i have a set schedule. I’m a independent contractor, 1099, my boss charges for over head on colors, haircuts, etc. I signed a no compete and she said I can’t take my clients with me when I leave.. most of the clientele that come in I fish for them through mixers and social media as their salon have very few walk ins.. I wanna quit and move to friendlier tied but afraid she’ll take legal action for taking my clients and working close to her salon.. These people are so evil..

  30. ello! My name is Jenelle Oldham and I have been working as a commission hairstylist in LA for the past 4 years. I have been the busiest stylist and the top money maker for the salon the entire time I have worked there. For tax purposes they have me classified as a 1099 and have been taking approximately 50% commission ( all deductions and written in pen) and then also making me purchase color and hair products from the owner and deduct it from my check as well. I have done the math and it’s around 100k they have taken in commission and not paid ONE dollars into my taxes and don’t give me proper receipts for my purchase which makes my taxes and life very hard. I work 11 hour days with no lunches and standing all day! I was at the salon more than anyone even the owners! They have been totally taking advantage of me… I was just too tired to figure it out! I started looking for a new job and and realized what they have been doing is completely not legal and I’m not going to let them get away with this! I have tried to contact lawyers but no one will help me and I don’t know what I should do first. I went to the Labor Board and they weren’t very much help either. I don’t know if I should file an SS-8 myself and also turn in the paper to the Labor board. Any insite you can provide on how I should proceed who be beyond helpful! Thank you for your website

    • Definitely file an SS-8 yourself. Some states are better than others about providing resources and assistance, but in many, you have to be the one to take initiative and really be a pain in their ass until they listen. (Some government employees aren’t worth shit and have to be forced to do their job. You’re a taxpayer. They work FOR YOU. Don’t let them forget that.)

      This post might be more helpful, as will this one.

  31. I’m a mobile massage therapist and I don’t want to travel to do one massage anymore so I’m changing my business to do spa parties and corporate chair massage. I’m not at a point where I’m always book but for when I have a larger party and I need someone with me can I contract another massage therapist or do I need to have an employee? And if the massage therapist needs to be an employee, how will i go about it if I need them for about 4-10 hours a month? Will I need to provide the massage table/chair, sheets, oils etc. Like I said I just started doing the spa parties so unless I have a large group I don’t need another therapist.
    Thanks

    • It doesn’t matter how infrequently you require their services, you would be better off making them an employee, as it would be hard to defend classifying them otherwise in this arrangement. I recommend reading this post to understand why a little better.

  32. I just emailed you. But I will also post here. Maybe someone else is going through the same thing.. I am on one income suddenly and am a lash artist. I interviewed at a place that wants to hire me as an IC and give split 50/50 commission. I do have to purchase my own adhesive and lashes. My employee taxes are not being paid however. A 1099 will be given to me next year. I need the income and she plans to have me sign a non compete while I work there. I of course know if im truly and IC she cant hold me to anything. But I digress. I am in a pickle financially and have two young children. I will work here a few months (its in a city 20 miles from me) and build my business with clients in my own area. I will not steal clients from salon, I have no interest. We live in a unique beachside barrier island. People will NOT leave their town unless its urgent. People in my area wont go to her, and people in her area wont go to me. We both discussed this when she asked me not to work outside the salon. If I was to talk with her about an appropriate business model what would I tell her? Lash artists services are high cost 150-250 dollars. Many lash artists I know of in other cities make 60 percent and their owner makes 40percent and pays employee taxes. I dont know what I should do if I discuss this with the owner later. But she makes my schedule, I will say she schedules me however I ask. And there are large amounts of clients so the place is always busy. No one sits around and does nothing.

    • You should not have signed the non-compete, regardless of what you think of its enforceability. Never sign anything you don’t plan to abide by, because they may decide to hold you accountable to it and a judge may agree with them. (It’s unlikely, but it happens.) In any case, she cannot ask you to be exclusive to her business as she does not employ you.

      Anyways, if we want to get technical, an appropriate business model is one in which you are lawfully employed, taxed, and compensated. Since that doesn’t appear to be an option, tell her to set a rental rate for you and allow you to run your own business entirely. I don’t know how any lawful employers are making a profit on a legal (taxed) 60/40 split. As an owner with a healthy financial balance in the salon, I can tell you that split wouldn’t be sustainable for us (nor for any of the hundreds of salons I balance finances for every year). That said, you’re paying your own taxes. That 60% will shrink to 44.7% after federal taxes. It will shrink further if you have to pay state income taxes.

      Ultimately, you have to choose compensation that makes sense for you. You’re the only one who knows what your lifestyle requires.

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