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How the Salon, Spa and Barbershop industries are affected by the California Labor Code

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The salon, spa, and barbershop industries have been greatly impacted by the California Supreme Court decision that makes it harder to classify workers as independent contractors. Some of the businesses affected include hair salons, hair color bars, barbershops, nail spas, destination spas, blow dry bars, massage therapy spas, waxing salons, threading salons, medical spas and more.

This ruling swept across California last April and has upended large and small workplaces alike. A broad range of California industries have been affected, not just newer companies like Uber and Lyft. Independent contractors can be found in numerous industries and businesses, including, but not limited to: music teachers, house cleaners, truckers, construction workers, software developers, coders, and hairstylists.

The ruling came in a class-action lawsuit against Dynamex Operations West, Inc., a package and document delivery company that has counted Amazon.com among its clients. The suit charged that Dynamex misclassified its delivery drivers as independent contractors, rather than employees. The ruling did not resolve that case, but defined independent contractors for lower courts that are grappling with the dispute.

According to the California Labor Commissioner’s website, the misclassification of workers as independent contractors costs the state roughly $7 billion in lost payroll taxes each year.

In order to classify someone as an independent contractor, the court says businesses must show that the worker is free from the control and direction of the employer, performs work that is outside the hirer’s core business, and customarily engages in an “independently established trade, occupation or business.”

Each of these business sectors may have workers that wish to remain, contractors, collecting untaxed wages up front without deductions for benefits, as well as having control over their own hours. It may also include others who prefer to be employees, with unemployment insurance and greater job stability.

The court has set a strict new test, however: It assumes anyone is an employee if his or her job is central to a company’s core business, or if the management directs the way the work is completed. Dynamex Operations West, Inc. reclassified their employees as contractors, thereby forcing them to use their own vehicles, and pay for gas and other expenses.

Modeled on a Massachusetts law, the court’s new test strikes at the heart of a fundamental transformation in the US labor force over the last half-century. Many companies have shifted large sectors of their workforces to independent contractor status, and offer no job security or benefits.

Full-time independent contractors constituted 8.5% of California’s workforce by 2016, according to estimates in UC Berkeley Labor Centers in-depth survey of available data. The study suggested that a somewhat higher percentage uses independent contracting for supplemental income.

The biggest hurdle in the case is that there was no set definition of what an “independent contractor” is in California law. Until the April 2018 ruling, the state relied on a previous California Supreme Court decision, S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989).

The court stated: “Generally, … the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.”

(a) whether the one performing services is engaged in a distinct occupation or business;

(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee.

The April court ruling now says workers are assumed to be employees unless all three of these factors can be proven:

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(A) that workers are free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that workers perform work that is outside the usual course of the hiring entity’s business; and

(C) that workers are customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Other organizations, like the Professional Beauty Association, are informing salon owners, barbershop owners, spa owners and licensed beauty professionals about all the latest legislation that directly affects the beauty industry. The PBA even offers an overview of legislative topics listed by state on their website.

The beauty industry has struggled for decades regarding the business model of employee-versus-independent contractor. Each side has their pros and cons, for both the business owner and licensed service provider.

The West Coast is home to many independent contractors—hairstylists, barbers, nail technicians, massage therapists and estheticians—as opposed to the Midwest and East Coast, where the majority of salons, spas and barbershops are employee-based.

Another new trend sweeping the beauty industry is the salon suites. Just like one might think of an office building, with each business renting office space and running their businesses independently, the salon suites business model is essentially a large building, and within it is a group of completely independent small salons, spas, and barbershops.

The “independent” business model works for the beauty professional that has an established clientele, and can afford the monthly rental fee.

The new beauty professional would benefit more from working in an employee-based salon structure that has good systems in place for mentoring and education, which are needed to grow and build a thriving beauty business.

Salon, spa, and barbershop owners are always looking for quality, licensed professionals. According to the Bureau of Labor Statistics, U.S. Department of Labor, employment for barbers and cosmetologists is projected to grow 13 percent from 2016 to 2026, faster than the average for all occupations. Population growth will lead to a greater demand for hair care services.

With this high demand for talent in the beauty industry, students should start seeking out the right salon, spa or barbershop to work at, even if they are currently attending Cosmetology School. As soon as the student passes the State Board of Barbering and Cosmetology exam and receives their license, they can already have a job lined up and begin working immediately.

With all the positive forecasting, it appears the beauty industry will remain thriving for at least another decade, which ensures that jobs for the licensed beauty professional (cosmetologists, barbers, nail technicians, massage therapists, and estheticians) are going to remain plentiful.

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