A few weeks ago, the Labor Commissioner’s Office — California’s government agency tasked with enforcing the state’s labor laws — cited a Temecula-based nail salon $1.2 million for misclassifying its 36 workers, and failing to pay them the wages they earned. It is one of the largest citations recorded against a nail salon in the state’s history.
While the amount of the citation is remarkable, the Temecula salon at issue is by no means unique in how it treats its workers. Wage theft — when employers fail to pay their employees their lawful wages — and misclassification of nail salon technicians as independent contractors (when they should almost always be classified as employees) are a way of life for many nail salon workers who labor in the 8,000 plus nail salons across the state.
Over the years, we have sought to challenge these unlawful practices for the benefit of nail salon workers, law-abiding employers, and conscientious consumers with the broader goal of changing industry practices. In our effort to improve the working conditions at nail salons, we have deployed a range of strategies from lawsuits to leveraging the media (English and non-English outlets) to working with partner agencies to host in-language information sessions for both workers and employers to improve knowledge of basic labor laws.
The nail salon industry has a long way to go before we can confidently say it’s working for everyone. Currently, a combination of many factors has led to the current state of affairs, where law-abiding employers cannot compete with unscrupulous employers and nail salon workers are not paid all the wages they are owed.
First, there is a relatively low bar to entry into this industry (i.e., English fluency is not required, the cost and time of training involved to secure a license is relatively affordable and short), there is no shortage of workers. Similarly, the cost of opening a nail salon can be cheaper than many other types of businesses. While this has helped many immigrants facing language and other barriers — making it difficult for them to compete in the mainstream economy — it has also resulted in a race to the bottom, causing the price of services to plummet which leads to a downward pressure on wages industry-wide.
These days, you can find basic pedicures for as little as $10 (which can take up to an hour to complete), which is below California’s minimum wage of $11 per hour, to say nothing of higher municipal minimum wages in places like San Francisco ($15) and Los Angeles ($12 for businesses with 25 or fewer employees). Our preliminary estimate is that the cost of a pedicure must be at least $19 before tips for a worker to be paid minimum wage. However, this is just the tip of the iceberg in terms of necessary changes in the industry to bring it in compliance with basic labor laws.
Since at least the 1980s, when the Vietnamese community began to dominate the nail salon industry, employers paid nail salon workers a flat daily rate, or a percentage of the sum total of the cost of services, rather than pay them by the hour. The more common practice now is the percentage-based pay structure, where the cost of services are split 60%-40% (40% to employers, 60% to workers), after certain deductions favoring employers, e.g. a $2–3 deduction for the use of “spa” chairs. So, for example, 60% of an $19 pedicure that requires 60 minutes means the worker receives $10.80 or lower if deductions apply, below the state’s $11 minimum wage. Under the 60–40 pay structure, employers are paid no matter what the circumstances, while workers are not guaranteed any minimum wage, which is an issue if the salon is slow on any given day. In many salons, the employers’ 40% cut is off the books and pocketed tax-free.
While this pay structure may have served both employers and workers well two decades ago, there is every reason to believe that in today’s market, which is saturated with numerous salons with very low prices, the typical nail salon worker no longer benefits from it. More often than not, workers do not enjoy a constant flow of customers so there may be hours where workers sit and wait for customers — time that is not compensated, resulting in wages below the minimum wage. Further compounding this unlawful and well-entrenched pay structure is the lack of legal education among employers and workers, which is partly due to willful ignorance as well as legitimate language barriers.
There are a few things that a conscientious consumer can do to address some of the abuses in the industry.
- Pay for the cost of services using a check made out to the salon or credit card. Do not pay in cash, unless it is for tips. Forcing more of the transactions to be on the books will inevitably encourage greater accountability.
- Try to schedule an appointment rather than be a walk-in customer so workers can be ensured a more steady workload.
- If you are comfortable, engage the nail salon worker and find out if they are paid an (unlawful) commission system of 60–40%. They may not even know that it is likely an illegal pay structure (unless workers are also guaranteed minimum wage and overtime for all hours worked, inclusive of required meal and rest breaks).
The citations towards the Temecula nail salon are worth celebrating. But it should also be a wake-up call that more work needs to be done to effectuate much-needed change to improve labor practices in the nail salon industry.
By: John Trang, Staff Attorney
John Trang is part of Asian Americans Advancing Justice — Los Angeles’ Impact Litigation Unit.