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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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Experience:  Significant experience in all areas of employment law.
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Nail Salon

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I am opening a nail salon and am finding that most manicurists will not consider being hired if I don't pay them on a commission basis, i.e. they do not want to be paid a wage. I understand that there is no clear-cut line between being an independent contractor vs. an employee, but are there steps I need to take to ensure that they are being properly classified as independent contractors?  Are there specific things I need to be saying to them so they are clear that they are independent contractors?  If I were to take these steps, is there any certainty that if one of them were to sue me that they weren't really an independent contractor, rather an employee, that I would prevail?  Is there any certainty that if I take these steps, the IRS doesn't come after me for back payment of employer taxes?

Good evening and thank you for entrusting me to answer your question. I will do everything I can to assist you.

As you correctly note, there is no black and white rule that courts apply when determining whether a worker is an indpendent contractor or employee. The ultimate inquiry is the degree of control the employer exercises over the individual they employee, with the greater the degree of control making it more likely the worker will be considered an employee.

Manicurists are commonly classified as independent contractors, and that designation is not typically improper provided the employer follows certain basic rules of thumb, such as:

- Requiring the manicurists to provide their own tools and materials

- No requirement with regard to hours or schedules

- Little to no discretion over the means by which manicures and other services are performed

- A written agreement indicating that the manicurists understand they are independent contractors (this will not be sufficient on its own but is one factor courts will consider when determining whether a worker is properly classified).

In general, it is good to have an agreement which establishes all of the above in writing. (I.e., "Employee understands that they have no set hours and can create their own schedule")

Following these basic measures, a manicurist may ordinarily be classified as an independent contractor. It is impotant, however, the remember that the more control you exercise over the worker, in terms of scheduling and method and manner of performing work, the more likely the classification will be found to be erroneous.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.
Customer: replied 4 years ago.

Thank you for your fast and thorough response.


 


I


So, it seems that there is a measure – do these things (x, y, and z), and they are more likely to be deemed an independent contractor? But there is no certainty?


I plan to have them use their own tools, but would it be okay for me to SUGGEST that they purchase certain tools?


Though I wouldn’t require that their work be performed a certain way, would it be okay for me to hold a workshop to suggest how they might do things, like provide better customer service? Would it be okay for me to require that they do other things, that do not impact their manicuring service, such as how often to clean their tools?


Would I still be required to provide worker’s comp insurance to them?


Would I need to give them a lunch break?

Thank you.
Thank you very much for your reply. Please allow me to address your concerns as follows:

So, it seems that there is a measure – do these things (x, y, and z), and they are more likely to be deemed an independent contractor? But there is no certainty?

Since these classifications are not black and white, it is impossible to be 100% certain about anything. That said, I am not aware of any instance in which a salon owner followed these guidelines and their workers were determined to be misclassified as employees.

I plan to have them use their own tools, but would it be okay for me to SUGGEST that they purchase certain tools?

Suggestions and guidance are okay, but there is a fine line between a "suggestion" and a requirement. Be sure to air on the side of the former.

Though I wouldn’t require that their work be performed a certain way, would it be okay for me to hold a workshop to suggest how they might do things, like provide better customer service? Would it be okay for me to require that they do other things, that do not impact their manicuring service, such as how often to clean their tools?

All of this, when considered together, is now really starting to sound like an employment relationship, and this is how employers get into trouble. They like the convenience and legal simplicity of classifying their workers as contractors but desire the control over performance which you can really only have when your workers are employees.

Again, you can make suggestions, but if you start implementing penalties for your worker's failure to comply, then they aren't really suggestions at all, they are requirements. Holding workshops and things of that nature is okay, but there is a fine line you must be very careful to walk, as the penalties for misclassification can be severe.

Would I still be required to provide worker’s comp insurance to them?

No. If they are contractors, no workers comp insurance is required.

Would I need to give them a lunch break?

Again, this requirement pertains only to employees.

Please feel free to let me know if you have any further concerns. If I have answered your question, I would be very grateful for a positive rating of my service so that I may receive credit for assisting you.

Kindest regards.
Customer: replied 4 years ago.

I understand more clearly now. If I make a suggestion, it is merely that. I cannot really make it a "standard" because if I do, I am toeing the line of an employer-employee relationship?


 


If I made a suggestion as to, for example, how often they clean their tools, but then do not penalize them if they do not follow that suggestion, would that be okay?


 


Last, if I more 80/20, in that 80% of what I do is clearly treating them as independent contractors, but maybe 20% of the time I do things, like requiring them to clean their tools a certain way, do you find that courts and/or the IRS weigh in favor of independent contractor status? Or are they more likely to penalize me for failing to classify them as employees? In other words, are they more prone to side on the side of the employee if some, but not majority, of what I do is of an indep contractor status?


 


I hope that makes sense.

If I make a suggestion, it is merely that. I cannot really make it a "standard" because if I do, I am toeing the line of an employer-employee relationship?

This is exactly correct.

If I made a suggestion as to, for example, how often they clean their tools, but then do not penalize them if they do not follow that suggestion, would that be okay?

Yes, it would.

In other words, are they more prone to side on the side of the employee if some, but not majority, of what I do is of an indep contractor status?

The presumption is that a worker is an employee, and the burden is on the employer to prove otherwise. The analysis to determine employee versus contractor status is not subject to mathematical calculation or systematic review, so while I appreciate your desire to break things down into a ratio of "employee" and "contractor" activities, that is a fundamentally flawed way to approach classification.

The classic example of an indpendent contractor is a gardner who performs landscaping services, such as mowing your lawn and pulling weeds a few times a month. They may have certain days on which they usually come, but they can cancel or reschedule, and they don't always show up at the exact same hour. They supply their own mowers, and herbecides, and you probably wouldn't tell them when to fertilize your lawn, though you would of course be free to ask them to limit their use of poison on your property, how short to mow your lawn, and where to dispose their waste.

Think about this dynamic, and the more you find yourself straying from it the more likely it is that you will find yourself in trouble. Are you comfortable with some marginal risk that the Labor Board will audit you and find all your workers to be misclasified, thus exposing you to claims for overtime, missed rest and lunch breaks, failure to carry workers compensation insurance, and more? I would be very averse to that risk myself and be extremely wary of pushing things too far. Not to mention if the Labor Board finds your misclassification to be "willfull" (highly unlikely in all but the more severe instances), you may be exposed to civil penalties in the thousands of dollars.

I sense that you want to retain some control and that is understandable, but understand the risk you are assuming as that control increases.

In short, some direction is okay, but then there is grey area, and given the penalties associated with misclassification, this is not an issue you should want to push too far.

I hope this helps.
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