There are many savvy business owners of successful salons, but how many of them are unknowingly failing to comply with state laws? Not knowing what your state labor laws are is not an acceptable excuse once you are in court facing a lawsuit. From the moment you begin your career, it is your responsibility to ensure you are complying with the law. Do you report your tips, file your taxes, and pay all applicable taxes? If you are a business owner, do you follow the labor standards for employee compensation, time off, breaks and lunches? If you are hesitant or unsure about any of these questions then chances are, you are a target for a lawsuit.

It Can Happen to Anyone

A case out of San Francisco, California, is a hard lesson learned. Joe Bisazza, owner of Joseph Cozza Salons, opened his doors in 1995. Within two years, the salon expanded from eight to 16 chairs and added two manicure/pedicure rooms and a makeup room.  In 2000, the business opened its second salon at the new San Francisco Four Seasons Hotel/Sports Club LA complex. Both salons are commission-based businesses employing 87 professional hairdressers, colorists, and manicurists in addition to onstage and backstage individuals.

In 2007, a wage and labor class-action lawsuit was brought against the salon by one former employee on behalf of every employee who had worked for Joseph Cozza Salons in the previous four years. Not only did Joe have to hire and an attorney and back track through documents establishing hours worked for his employee, he incurred out-of-pocket expenses totaling more than $1 million.

Joe’s attorney, Sandra McCandless of SNR Denton, explains that the problem often comes from lack of knowledge on state wage and labor laws.  

“Business owners often unwittingly break wage and hour laws.  Many business owners, particularly those with small to medium-sized businesses, do not know the requirements of federal and state wage and hour laws,” said Sandra.

She continued by outlining the three most common wage and hour law violations amongst salon/spa businesses:

• Employees are often treated as “exempt” when they are actually “non-exempt” and must be paid overtime for time worked over 40 hours in a week. In California, for example, non-exempt employees must be paid overtime for hours worked over eight per day. Generally, salon/spa employees are legally exempt from overtime pay requirements only if they manage other employees or perform administrative work requiring the exercise of discretion and independent judgment.

• Salon owners sometimes pay the professionals in their salons as independent contractors without knowing whether those professionals can legally be treated as contractors. Among other indicators, if the salon owner has the “right to control” a professional’s work, the professional may be an employee not a contractor. There can be serious legal implications to the treatment of an employee as an independent contractor.

• Other practices used by some salon owners which are potentially subject to legal challenge are deductions from wages for back-bar charges, charging for the use of an assistant, failure to compensate for certain time worked, and taking impermissible deductions from wages.

Protect Yourself and Your Business

Beside taking the time to thoroughly know and understand your state’s labor and wage laws, Joe cautions his fellow salon/spa owners to be pro-active before you find yourself in a lawsuit.

“The best practice, and the one I strongly recommend, is to audit your practices up front with an employment attorney to be sure you’re in compliance with all of the applicable laws,” he said.

Sandra agrees and suggests putting in place other policies to protect yourself against potential lawsuits, including:

• Have written employment policies signed by employees confirming that employment is at will; prohibit sexual harassment and harassment on other protected bases, such as race, national origin, and age; and set forth the business’s over-time pay policy.

• Have documentation of the business reasons for terminating an employee.  An “at will” policy protects against employment contract claims but does not provide legal protection from discrimination and other types of employment-related claims. The best practice is to provide an employee with a written warning for poor work performance before terminating and, in the event of misconduct, to be sure that documentation, including the termination letter, supports the business reason for termination.

Stemming from his lawsuit experience, Joe has put in place the following rules for his professional commission-paid employees:

• The employer must pay overtime wages for all time worked over eight hours in a day, or forty hours in a week, and provide a minimum 30-minute meal break.  This can be complicated in our industry but the employer can comply with careful tracking of time worked.

• Commission-based professional employees should clock in and out at the beginning and end of the day and at the beginning and end their lunch breaks, which must be taken within the first five hours of the work shift.  The stylist or front desk should not schedule a client during the lunch break.

• Back-bar or service charges should not be deducted from wages.

• Stylists and colorists should not be charged a fee for the use of an assistant.

• Employees sign a compensation letter upon starting their employment.

• The employee’s pay stub indicates the gross revenue earned by the employee so that they can easily calculate their commissions.

• There are no deductions for employee purchases in the salon.

• If a second employee performs a re-do service, we compensate both employees in full.

• Any work done “gratis,” such as hotel concierge or charity donations, are paid to the stylist from the salon just as if a client had paid for the service.  You may establish a set fee for such services.

Don’t wait until you face a fine or lawsuit to get smart about how you run your business. Know the laws and regulations that impact you as a business owner and take the time to learn how to track employee hours, invest in training, and research the labor laws in your state.

PBA would like to extend a special thank you to Joe Bisazza for sharing his story and Sandra McCandless for offering legal insights.

Resources:

United States Department of Labor

Minimum Wage Laws in the States as of January 1, 2011

www.dol.gov/whd/minwage/america.htm

United States Department of Labor

State Labor Offices

www.dol.gov/whd/contacts/state_of.htm

California Department of Industrial Relations

Industrial Welfare Commission Order No. 2-2001

Regulating Wages, Hours, and Working Conditions in the Personal Service Industry

www.dir.ca.gov/IWC/IWCArticle2.pdf