The California high court has been considering how some work is defined as "contract work" (or some employees as "independents," as in the salon world of suite, booth, and chair renters or “gig workers” like those who work for trucking companies) and if this might be a way for employers/owners to get around employee and wage laws.  This week, lawmakers passed a landmark bill, Assembly Bill 5 or AB 5, that will require some independent contractors to be reclassified as employees.  AB 5 is being sent to Governor Gavin Newsome for his signature. (AB 5 codifies the decision of the California Supreme Court in the Dynamex Operations West, Inc. v. Superior Court of Los Angeles regarding employee classification.)

The three prong A,B,C test will apply, with exception to certain industries that are exempt within the bill. That includes barbers, cosmetologists, estheticians, electrologists, and manicurists, who are among the listed exempt professions.

This ABC test referred to three factors that the hiring entity must establish:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

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

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.)

While barbers, cosmetologists, estheticians, electrologists, and manicurists are exempt, the individual must still:

• Set their own rates, processes their own payments, and be paid directly by clients

• Set their own hours of work and have sole discretion to decide the number of clients and which clients for whom they will provide services

• Have their own book of business and schedule their own appointments

• Maintain their own business license for the services offered to clients

If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.

“This means that the professional beauty industry is exempt from the A,B,C test that resulted from the Dynamex case,” says Myra Y. Irizarry Reddy, Government Affairs Director for the Professional Beauty Association (PBA). “There are still requirements that must be followed, and compliance issues that surround operating a hybrid salon but the exemption within AB 5 does provide relief for establishment owners that both work as stylists themselves as well as rent booth space. Other states may attempt to mirror this legislation in the future and we definitely will be looking for this in 2020.”

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