AB5 Dive: Should Beauty Pros Be Worried?
Tags: Salon Business, Nail Technician, Ab5, Freelancers, Gig Worker Law

Photo by Pham Khoai

The new AB5 law applies to all California workers. However, there are some industries and professionals who may be impacted more than others. Beauty service providers and salon business owners are definitely starting to get concerned. But should they be worried?

According to the Gig Worker Law that went into effect in January 2020, a business must go by the strict new ABC test to determine whether workers are employees or independent contractors (ICs). To classify a worker as a freelancer, a business must show that:

A. That the worker is free from the control and direction of the hiring entity in performing the work, both in the contract for performance and in fact B. That the worker performs work that is outside of the usual course of the hiring entity’s business C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

It is item B that will likely cause the most difficulty for salons and other beauty services companies. The ‘usual course of business’ of a salon is providing beauty services. Therefore, beauty professionals providing beauty services violate the second requirement. As such, beauty professionals must be considered employees of the salon where they work.

Fortunately, there are several job categories which are specifically exempted from this strict ABC test. And, yes, licensed beauty professionals are included. Unfortunately, workers in these exempt categories are not automatically independent contractors. Instead, beauty professionals must pass the Borello test (the test in effect before AB5 was enacted).

OK. So, now, you’re probably asking, “Which is it? Do stylists and nail technicians need to meet the ABC or Bolero test?” The answer is BOTH. Although the ABC test supersedes Borello in most cases, Borello is still in use when California AB5 is inapplicable or when exemptions apply.

Under the Borello test, the most significant factor is whether the salon has control or the right to control the worker both as to the work done and the manner and means in which it is performed. In addition, the following factors are to be considered:

Whether the worker is engaged in an occupation or business that is distinct from that of the hiring firm Whether the work is part of the hiring firm’s regular business Whether the hiring firm or the worker supplies the equipment, tools, and the place for the person doing the work The worker’s financial investment in the equipment or materials required to perform the work The skill required in the particular occupation The kind of occupation — whether, in the locality, the work is usually done under the hiring firm’s direction or by a specialist without supervision The worker’s opportunity for profit or loss depending on his or her own managerial skill How long the services are to be performed The degree of permanence of the working relationship The payment method, whether by time or by the job, and Whether the parties believe they are creating an employer/employee relationship

While no single factor in the Borello test determines how a worker is defined, the question as to whether the worker is engaged in an occupation or business that is distinct from that of the hiring firm is given the most weight. For salons, this obviously is an issue just as it was in the ABC test.

But, wait, there’s more. Aside from the Borello test, to be considered a freelancer, a worker must:

maintain a business location separate from the hiring firm — this may include the residence have a business license, in addition to any required professional licenses or permits be able to set or negotiate his/her own rates for the services performed be able to set his/her own hours (a) be customarily engaged in the same type of work under contract with another hiring firm, or (b) hold themselves out to other potential customers as available to perform the same type of work, and customarily and regularly exercise discretion and independent judgment performing their services.

There’s more… Specifically, licensed barbers, manicurists, electrologists, cosmetologists, and estheticians also qualify as independent contractors under this exception if they meet the above requirements and also:

set their own rates, process their own payments, and are paid directly by clients set their own hours of work and have sole discretion to decide the number of clients and which clients they provide services for have their own book of business and schedule their own appointments maintain their own business license for the services offered to clients, and issue a Form 1099 to the salon or business owner from which they rent their business space.

The good news is that the ABC test will apply to licensed manicurists on January 1, 2022. So, salon business owners, managers, and professionals have time to start looking for solutions like Rylyf.

The Rylyf App was developed to allow licensed beauty professionals and salon owners to comply with the new gig worker legislation without having to make drastic changes to their business structures. What’s more, this app provides appointment management, payment processings, and marketing built-in.