Earlier this week, I was advising a client on the termination of one of their spa employees. During the course of the conversation about his poor performance, the issue of his compensation came up. Turns out, while the termination was completely legitimate and non-discriminatory, we discovered liability for the client based on the employee’s commission-only salary structure and failure to provide meal and paid rest breaks. The next evening, while having my haircut, I raised this compensation structure with my stylist, also a massage therapist at a Southern California spa. Lo and behold, same arrangement.
Yesterday, a judge approved a nearly one million dollar settlement for the Sonoma Mission Inn’s posh Willow Stream Spa to settle a wage and hour, 103-member, class action lawsuit. That doesn’t sound relaxing at all.
Here are some issues I have seen the past few months that can get spas and salons in trouble:
1) Paying by piecework (e.g. per treatment or service): this implicates AB 1513, which became effective January 2016, and requires compensation for all hours worked during a pay period, including breaks and other “non-productive” time. Many workers on a piece work plan are still not being paid for breaks as required by law. AB 1513 also requires a host of record-keeping obligations.
2) Paying by commission: legally speaking, commission payments are a percentage of sales and should not be paid for services performed. With spa or salon employees, it is arguable whether they really “sell” anything, in which case, a commission structure doesn’t work. Payment by commission requires the terms to be in writing and paid in the pay period they are earned. Employers frequently confuse the piece-rate and commission concepts and wind up in non-compliance.
3) Failing to pay minimum wage or overtime: because of the issues above, some spa workers are not receiving proper minimum wage or overtime payments. At spas where the compensation is a hybrid of compensation schemes, employers must be careful to calculate the regular rate properly.
4) Misclassification: some employers are still classifying therapists and aestheticians as independent contractors in likely violation of CA law. Because these workers are working in the spas at the direction of management, it’s a tough argument to make that such workers are independent contractors and exempt from the issues above.
If you are thinking you need a massage (or stiff drink) after reading this, I’m sure you’re not alone.