It’s that time of year! The Know Your Rights post has been revised and expanded for 2017, and this year, I’m introducing The Salon Employee Suitcase. The Salon Employee Suitcase contains
everything you need to get acquainted with your rights as an employee and protect your wages, so check it out.
Throughout the year, I’ll be introducing even more downloadable resources for salon professionals and salon owners, so keep an eye out for those! I have a huge pack of materials in the works for self-employed microsalon owners, another for independent educators, a pack for salon landlords, and a literal ton of stuff being prepared for traditional salon owners. Be on the lookout, because 2017 is going to be an extremely productive year for all of us.
Want to listen to this article instead of reading it? No problem.
Do you know what your rights are as a beauty professional? The terminology can be confusing. Are you classified as an employee or are you considered self-employed, and what defines the difference between those titles? Where do booth renters fit into all this?
YOU MAY THINK THAT YOU KNOW EXACTLY WHAT TYPE OF SALON PROFESSIONAL YOU ARE, BUT YOU COULD BE WRONG.
This article defines the common roles and classifications found in the beauty industry, outlines common abuses all professionals need to be aware of, and will let you know what your rights are in your workplace.
First things first: In a salon, you are either self-employed or an employee. You can not be “half” anything.
Employees are on the salon’s payroll and are usually paid hourly, commission, or some combination of both.
Let’s define the employee’s role and clarify acceptable expectations:
- Employees are required to follow their employer’s directives. They must work the employer’s schedule and adhere to salon policies and dress codes. They must use whatever products the salon requires them to use and perform services in accordance with the salon’s protocols. They are also required to participate in promotional events (discounts, coupons, etc.), continuing education, and mandatory meetings. However, any time the employer requires an employee to be present, that time is compensable and the employee must be paid.
- An employee’s clients pay at a centralized location, usually at a reception desk. Aside from tips, employees are never paid directly by customers.
Employees come in two varieties: exempt and non-exempt. Employees are generally covered by worker’s compensation, unemployment, and the salon’s professional liability insurance policy. They are paid at the end of each pay period by their employer. The employer withholds the employee’s half of their employment taxes and matches their contribution by remitting the other half. That equal tax contribution is the price employers pay for that degree of control over the employee.
- Unless they’re salaried in compliance with the FLSA (or state/city legislation), employees are considered non-exempt, which means they’re entitled to the prevailing minimum wage and overtime wages.
- Salaried workers are considered exempt from the prevailing minimum wage laws and overtime laws, but they’re still typically protected by the other provisions of the Fair Labor Standards Act.
- Regardless of the compensation method (commission or hourly), employers must generally ensure to pay their non-exempt (non-salaried) employees at least the prevailing minimum wage, whether the employee is working on a client or not. (Time tracking is a mandatory federal requirement, so employees need to be clocking-in and clocking-out daily.)
- In at-will employment states (which is virtually all of them in the U.S.), employees can be fired at any time for virtually any reason, so long as it the termination isn’t discriminatory or retaliatory.
- The employer provides all supplies and products and has complete control over the employee during their employment. Employers, in most states, are not permitted to arbitrarily deduct money from the employee’s wages to cover cost of doing business expenses, like product.
What does it mean to be “self-employed” in the beauty industry?
When you are self-employed, you are a business owner. In our industry, most self-employed professionals are what I call Microsalon Owners—any professional who owns and solely operates a salon business. Booth renting is no longer the only form of independent salon ownership. Now, professionals rent studios, run home salons, operate mobile salon units, and freelance all over their state. Salon co-ops are even popping up, with multiple investor-slash-owners.
In addition to that, an extremely new concept that’s been modeled from the technology industry and is likely to catch on like wildfire in our own in the next few years are co-working salons, where independent professionals can drop in to work on their clients and network with other professionals by simply paying a fee at the door or obtaining a monthly membership—no leases, no contracts, no strings—just an open area where professionals can work, organize classes, meet other professionals, and grow together.
However, those other forms of independent entrepreneurship are separated from booth rental in that the professionals who own those microsalons are very clearly in business for themselves. When it comes to booth renting in a salon, especially in an open air salon where the stations are in a common area without walls or doors to separate them, lines are frequently crossed by both renters and the landlords they lease from, so let’s specifically address who booth renters are, what they do, and what is and isn’t acceptable.
Booth renters are commercial tenants who lease space within a salon facility.
Renters run their own businesses and are completely independent from the rest of the salon in which they work.
- Renters keep 100% of their profits, pay for their own product and supplies, set their own prices, and work on their own schedule at their own convenience.
- Clients pay the booth renter directly and the booth renter is solely responsible for booking their own customers, acquiring new customers, and paying their own taxes.
- Booth renters choose which products they are going to use and sell and perform their services however they please. They create their own service menus and set their own pricing.
- Booth renters cannot be fired. They must be properly evicted in accordance with the lease agreement or the state’s commercial landlord/tenant laws.
To a renter, a salon owner is nothing more than a landlord. The owner typically has no control over the renter, whatsoever.
Previously, renters were required by the IRS to have a key to the salon to be able to prove that they can come and go from the space as they please. However, the IRS no longer makes key-holding mandatory. As long as the renters have access to the building during the operating hours stated in their lease, they are not required to have keys.
(And yes, renters and salon landlords, both of you need written leases.)
It’s important for salon landlords to understand that they cannot:
- dictate a booth renter’s schedule,
- force the booth renter to have their clients pay for their services at a centralized location (like a reception desk),
- tell a booth renter what products to use, how to perform a service, or what to charge for their services,
- force a booth renter to participate in a promotion or coupon unless agreed upon in writing.
- “fire” a booth renter,
- force a booth renter to adhere to a dress code or other salon guidelines or rules, or
- require the booth renter to use the salon’s branding or promote the salon’s name in any of their marketing materials.
The renter, in exchange for that freedom to operate without interference or control pays the entirety of their self-employment tax, which equates to 15.3% of their income–a pretty substantial chunk.
It’s also important for booth renters to understand that they are not entitled to free rent for vacation time, free backbar, or anything other than the space they’re paying for. Additionally, salon landlords are not required to provide renters with a clientele.
Finally, let’s talk about the criminally misunderstood “independent contractor” status.
Independent contractors are not employees. They are self-employed, just like microsalon owners are. 99% of independent contractors are illegally misclassified in this business.
Independent contractors are freelance professionals.
I often refer to independent contractors as the gypsies of the beauty industry, and for good reason.
- Independent contractors do not go to work every day, all day long, at the request of the salon owner. Much like a booth renter, independent contractors operate independently, free of excessive control from the business owner. The salon is typically not their only place of employment, they are not leasing space, and they are not on the payroll.
- Independent contractors are contracted, responsible for all of their own taxes, and do not answer to a salon owner except to ensure the contract terms have been fulfilled.
- Independent contractors must be provided with a 1099 form at the end of the year if the salon owner has paid them more than $600 in that year.
THIS CLASSIFICATION SELDOM, IF EVER, BELONGS IN OUR SALONS.
I have written about this topic to death. If you remain subscribed to this blog, you’re going to be so informed about the abuse of the independent contractor status tax attorneys will be awed by your knowledge so for now, I’m going to tell you the three most important things you need to know:
- Salon owners often use this classification to evade employment taxes. When exploitative owners classify professionals as self-employed, they’re shoving the entirety of your employment tax burden onto the professional, so 15.3% of what they earn will have to be paid out of the professional’s pocket to the IRS at the end of the year. A good deal of these salon owners aren’t aware that this practice is illegal, but the IRS and DOL don’t distinguish between criminals with good intentions, criminals with bad intentions, or criminals who became criminals through their ignorance of the law. Business owners are expected to do their own homework and make informed business management decisions.
As a worker, you are not expected to suffer for anyone’s failure or inability to perform their own due diligence.
- Self-employed workers lose legal protections. When a person is self-employed, they’re generally not eligible for worker’s compensation, unemployment, the required minimum wage, overtime wages, federal protections against workplace discrimination and retaliation, or any of the other benefits they would be entitled to if they were employees.
- Never let a salon owner tell you this classification is “better for you because you won’t have to pay taxes.” Trust me, you will have to report your income and pay your taxes. In reality, this situation only benefits the salon owner, because they get to control you like an employee and skip out on worker’s compensation insurance, employment tax, wage obligations, and the other responsibilities and liabilities that come in exchange for that degree of control.
Whether it’s intentional or not, misclassification is a crime. Improperly classifying salon employees as independent contractors makes it easier for exploitative salon owners to commit other crimes against their workers, like wage theft. Believe it or not, state and federal governments take tax evasion, wage theft, and labor abuses pretty damn seriously. They take them so seriously they team up and perform joint investigations. Whichever agency is initially alerted (whether it’s the IRS, the DOL, or your state labor board) will alert the two others. They will join forces in what’s called a “three pronged investigation.” (I call it the Hell Trifecta.)
This is a big deal. The penalties are extremely severe. (I would know, I collaborate with the attorneys of salon owners to help them navigate audits and labor investigations for a living.)
Unless you are truly a freelance gypsy professional, following the money wherever it may be and setting your own terms working under your own brand, you are likely not an independent contractor, and no salon owner will be able to twist the truth enough to justify tax evasion and labor abuse with the IRS.
When an owner tries to convince you that this is okay, shut them the hell down and walk out.
The only way this pervasive abuse stops is if we stop allowing it to happen in the first place. If your employer has been misclassifying you, read this post to learn how to approach them respectfully about correcting their practices before it’s too late.
KNOW YOUR ROLE AND KNOW YOUR RIGHTS.
If you have a question, instead of emailing me, I prefer it if you leave a comment for me in the comments section. All comments are moderated, mostly because nobody wants to see a bunch of ads for boner pills and knockoff Nikes in the comments section, but the moderation queue also keeps me organized. I write responses before I approve them, so no comment goes unanswered. If you have a question, please ask it there so others can benefit from the answer I provide to you.
A quick message to the rabid keyboard warrior salon owners: before commenting here (or anywhere on this site), do yourself the tremendous favor of researching me and what I write before you decide to make a fool of yourself. I’ve written over 300 articles, many in defense of salon owners. I don’t play favorites here. I call bullshit like I see it.
If you don’t like the laws, take it up with your congressman. I didn’t write them, I just expect you to obey them like every other business owner in the country.
Let’s get into the frequently asked questions. First, we’ll cover some questions asked by salon landlords and salon owners, then I have some from booth renters, employees, and independent contractors, and a few general questions that don’t really have a category but are relevant to the topic.
FAQ for Salon & Spa Owners
“I’m a salon owner and a booth renter is causing serious problems in the salon. Can I terminate her contract before the renewal term?”
If there is a clause in the rental agreement that states that the owner can terminate the contract at any time, yes you likely can. If not, you must abide by your state’s commercial landlord/tenant laws, if any exist. To save yourself the aggravation in the future, consider have your attorney write termination provisions into your future rental contracts.
“My employee brought her clients, can she take them with her?”
You don’t want employees coming into your business and taking clients from you. Treat them as you like to be treated and do not take from them what isn’t yours to take.
“Help! My employees are copying my client’s contact information for their own records! What can I do?!”
If you had them sign non-solicitation agreements, you can likely cease the activity immediately and threaten termination and/or legal action. If you didn’t have them sign anything, there’s likely not much you can do about it, but you should damn well try.
“I run a booth rental salon, do I need to provide keys and security codes to each renter?”
The IRS no longer makes keyholding a requirement. Whether or not you are legally required to do so depends on your state’s commercial landlord/tenant laws. Consider electronic deadbolts. Give your renters passkeys for 24/7 business access. Charge extra for it.
“How do I inform my clients that a popular staff member has quit in order to keep them coming back to the business?”
Be honest with them and never talk badly about the staff member. Call every client that is scheduled with that staff member for the next six weeks personally. Tell them, “Unfortunately, your preferred stylist has chosen to move on. If you’d like to keep your appointment, I can schedule you with [insert staff member name here]. They really excel at [insert that client’s preferred service here] and would be willing to offer you [insert discount amount here] if you’d like to give them a shot. However, if you’d like to follow [the old staff member] to her new place of employment, I’d be happy to give you their information.”
A lot of salon owners make the mistake of withholding information from clients. Don’t do it. I know you’re only trying to retain business, but the clients who are loyal to a particular staff member were loyal to them for a reason. For a lot of clients, finding that perfect stylist or nail technician is a long, arduous process. They would follow their preferred professional to the end of the earth if they had to. They don’t appreciate being mislead, manipulated, or lied to. Being honest with clients will go a long way and they may return to your establishment in the future if their preferred professional happens to be a “jumper,” moving from one business to another frequently.
For the rest of the clients, send a nice letter with a coupon inside. “Unfortunately, your preferred stylist has moved on to another establishment. We wish her well in her endeavors! Enclosed is a coupon for [insert discount here]. Please call us if you would like to schedule an appointment!”
Remember to keep your dignity and integrity. Don’t discuss the conditions under which the staff member left. If the client asks, simply say, “It just didn’t work out,” and move on to something else. Never slander anyone. If your ex-staff member is doing it, let it go. Let her look like trash.
YOU’RE A BUSINESS OWNER, HOLD YOURSELF TO A HIGHER STANDARD.
“What is the best employment and compensation arrangement?”
FAQ for Booth Renters
“Can the salon owner fire me?”
You’re not an employee, so no. A landlord can never really “fire” you. (That’s the wrong word.) They can, however, terminate your lease. Read your contract carefully to find out if there are any clauses that allow them to terminate without notice and check your state’s commercial landlord/tenant laws.
“The salon owner sold the business and the new owner is trying to raise my rent. Can they do that?”
Probably not. Generally, they have to abide by the original lease agreement or renegotiate it with you.
“Can the salon owner tell me what products to use or force me to go through their training program?”
No. You are your own business owner. You choose the products, you choose the services, you set the prices. You are not required to go through any training or adhere to any rules the owner sets forth.
“Can the salon own force me to participate in promotional events or take coupons?”
No. You can participate if you want to, but requiring you to would likely constitute an inappropriate degree of control.
“Do I have to put the salon name on my business cards?”
No, and you shouldn’t. Keep your business separate from the establishment you’re leasing from. You are your own business.
DO NOT ADVERTISE A BUSINESS THAT DOESN’T BELONG TO YOU.
You can say you’re “located inside of [insert salon name here]” if you’d like, but don’t use their logo.
“My boss has me pay a percentage of my daily service sales as rent. If I make under a certain amount, my contract says I have to pay a set amount. Is that legal or fair?”
That depends. As of the writing of this article, I cannot find any laws to dictate otherwise.
As a rule, your rent should not be variable since the value of the space doesn’t change from week to week. I will say this though: if you’re new talent just out of school or you’re getting back in the game after a long time out, it may be beneficial for you to start out on profit-share in lieu of fixed rent during the time you’re building.
Keep in mind that you are still required to provide your own products, manage your own books, and promote yourself, so your rent should reflect that (you should be paying out 15-20%).
A lot of owners won’t offer this opportunity to stylists because it is hard to track and puts them at a financial disadvantage, but some kindhearted, generous owner will periodically offer it. If you’re an established pro and the owner wants 40 or 50% of your commission as booth rental–you’re getting screwed. Get out of there.
Owners, in five out of six IRS revenue rulings, salon landlords who took a percentage of gross sales in lieu of rent were determined to be employers; not landlords. If you don’t want to find yourself in a position where you have to pay back wages, back taxes, and penalties, avoid the practice and take a flat rental amount.
“Can I claim my booth rental as a business expense on my taxes?”
Yes. It is a business expense.
“The owner won’t allow me to retail my product line because they carry the same products in their lobby. She wants me to retail her products but won’t pay me a commission. Can she do that?”
If the owner has a retail store in the salon, she can put a clause in your lease that prevents you from selling the same products. She cannot require you to retail her products, however. If you sell a lot of retail and want to carry a specific line that the owner already carries, find another place to rent. For a lot of owners, those retail boutiques help keep the business profitable (and keep your rent reasonable).
“Do I have to carry my own salon insurance?”
Technically, yes. Salons usually provide general liability and property insurance while the booth renter is asked to provide their own professional liability. Many salon owners will provide professional liability insurance as a courtesy, however. Check with your salon owner to make sure that you are covered. If not, shop around for a plan. Quickly.
“The owner wants me to use her receptionist and have my clients pay at the front desk. She is then going to write me a check for the full amount. Is this legal?”
DO NOT. This puts the salon landlord in an extremely legally perilous position. Your clients pay you. They book appointments with you. Do not hand your money over to anyone else for any reason. You are a self-employed business owner. Keep your business separate from the salon owner’s.
FAQ for Employees
“Is my salon owner required to pay me hourly wage?”
The FLSA dictates that your commission must meet or exceed minimum wage for each hour worked in a pay period. Whether or not you employer is in compliance can vary from paycheck to paycheck (and sometimes by circumstance).
“Can I notify my clients that I’m moving to a new salon?”
That depends on several factors. Are the clients yours? Were there any stipulations in your employment contract that say you can’t market to the clients?
In order for a client to be “yours” you have to have brought them with you to the establishment from your school or prior place of employment. Clients you gain through referrals from these clients fall into this category as well. These are clients you obtained through your own networking and advertising, so they belong to you and you should have their information kept in a safe place at home. Those clients who are loyal to you are going to want to know where you’ve gone.
I’ve seen it happen a thousand times when a stylist leaves and doesn’t notify their clients. You know who else doesn’t notify their clients? The owner. Generally, your appointments will get shifted to whoever is available and the client will only discover that you’re gone when they show up for their appointment. In almost all cases, the owner will not divulge any information on where you’ve relocated to in an effort to retain those clients (definitely a bad move on their part because the clients do not appreciate it). Your clients are your paycheck. You work hard to build that book so keep it together and protect it.
Now, if the clients are people that you’ve gained at the salon, there is a whole different set of rules. Say the client walks in off the street or calls because she saw an ad in the paper. This client was obtained through the owner’s networking and advertising tactics and this client does not belong to you.
It doesn’t matter if the client has been seeing you for 5 months or 15 years. If they initially came to the salon because of the owner’s marketing, their contact information belong to the business–not you. It is unlawful and incredibly unethical to try and lure these clients away from the salon and yes, your ex-employer can seek legal action against you for it (as they should).
“I was fired from a commission salon. Can I get unemployment?”
Whether or not you’re eligible is debatable and situation-specific. Whatever you do, do not ask me about it. Ever.
“Can my boss require me to provide my own product?”
As an employee, providing product is their responsibility. If there are products you prefer to use, you will have to get permission from your boss and pay for it out of your own pocket. (A lot of owners will accommodate you however, if you have a preferred product that you absolutely can’t work without. Many of them understand. All of us have a few of our favorites.) Most states have laws in place to protect employees from unlawful paycheck deductions, like head fees, service charges, or product fees.
“Do I have to do work I’m not getting paid for? (Like cleaning, answering phones, and doing laundry?”
Are you getting an hourly wage? If so, then yes.
If you are on commission only and your employer is FLSA compliant, then yes.
If you are working for an owner that is not FLSA compliant, then no.
However, if you are on a schedule and you’re there anyways, you might as well keep yourself busy. Answering the phone is a great way to introduce yourself to clients. Cleaning and doing laundry are surefire ways to impress your boss and potentially get a raise in the future. It also helps time pass.
“Can my boss make me stay when I have no clients?”
Yes, if you’re a W-2 employee. If you’re an employee and the owner is FLSA compliant, you are expected to adhere to a schedule.
FAQ for Independent Contractors
“Can the owner make me stay if I have no clients?”
No. You are an independent contractor. You are not required to do anything other than the services you’ve been contracted to perform.
“Can the salon owner make me sign a non-compete agreement, making me exclusive to that establishment?”
As an independent contractor, you can work at every salon and spa in town if you want and freelance on the side. You are not obligated to any of them.
“Am I required to perform work I’m not getting paid for? (Like answering phones, cleaning, and folding towels?”
Independent contractors perform services. That is it. It is courteous to pick up after yourself and leave the treatment area in the same condition you found it, but outside of that, those jobs are the responsibility of the business owner.
“Am I required to supply my own product and equipment?”
If you prefer to supply your own product and equipment, you can, but it will be at your own expense. A business owner is not required to cater to your preferences. However, you can (and should) charge them for the product expenses.
“The owner handed me her contract. I’ve read it and I absolutely can’t work under her terms. Can I back out without a penalty?”
Yes, as long as you haven’t signed the agreement.
“The owner wants me to sign a non-compete contract. The contract states that I will not work at any other spa while working at her business. The contract also says that I can not work in the same town or market to the spa’s clients. It also says that any clients I bring to the spa become the property of the spa and that I can’t take them with me if I choose to move on. Can they really enforce this?”
Generally they can’t because most states consider non-competes that restrict employees from working in the same town to be unconstitutional, but in no case should you ever sign a contract like that. Ever. Never sign anything that could impair your ability to work. Here’s an article on non-compete agreements.
“My boss doesn’t do payroll. They pay cash out at the end of every day or week. Is that legal?”
It’s shady. If they’re not doing payroll and they’re paying you cash, they’re not claiming you as an employee. Your taxes aren’t getting paid and they’re putting you in a bad situation. In addition, many states have laws regarding how payroll is handled and reported to the employees of a particular establishment.