Pre-pandemic salons and spas faced liability for the following compensation structures:
- Paying commissions to employees who were not selling goods or services; and
- Paying by piece rate (e.g., per treatment or service), (complicated because of requirements related to payment for nonproductive time, and specific requirements for paystubs).
These payment structures, when performed improperly also implicated additional wage and hour issues, such as failure to pay minimum wage and overtime payments, and failure to properly pay meal and rest breaks.
Labor Code Section 204.11 complicated the matter as it changed the definition of the term “commission” in this context. The Code specifies that wages paid to employees who are licensed under the Barbering and Cosmetology Act, and provide services for which such a license is required, are commissions only if: (1) the employee’s base hourly rate is at least two times the state minimum wage in addition to commissions paid; and (2) the employee’s wages are paid at least twice during each calendar month on days designated in advance by the employer as regular paydays.
With the re-opening of salons and spas back to their full capacity we suspect that the Department of Labor Standards Enforcement (DLSE) will again step-up enforcement. Thus, to avoid an enforcement action many salon and spa owners are asking what the best compensation structure is for their spas and salons? It will all depend on the owner’s particular situation and predilection. Here are three payment options:
Option 1: Rather than pay on a commission basis, salon and spa employers can pay their employees an increased hourly rate. This increased hourly rate could be based on a blended rate depending on the treatments offered. In this manner, there would be no commission structure.
Option 2: Pay the employee 2x the California minimum wage plus agreed-upon commission. Spas can choose to pay by California’s permissible commission structure, which requires complying with Labor Code Section 204.11, and having a
signed commission agreement.
Option 3: Spas can pay by piece rate, in compliance with Labor Code section 226.2
If you operate a spa or salon in California, take note and give your business or employment attorney a call for a review and discussion. The resumption of full services post-pandemic will also bring the resumption of new wage claims by employees and the DLSE.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
