California salons and spas that pay employees on a commission basis take note.
On October 10, 2015, California passed Assembly Bill 1513 which requires employers who pay their employees on a “piece-rate” basis (think commissions for salon/spa services) to pay those same employees a separate hourly minimum wage for time spent recovering or on other tasks, even if their total compensation for a pay period exceeds the minimum wage!
Under the law, salons and spas must pay commission employees an hourly wage for “rest and recovery periods” and “other non-productive time” defined as “time under the employer’s control, exclusive of the rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” For salon and spa employees, this “other non-productive time” may include cleaning their station, sweeping the floor, or simply waiting for the next appointment.
Employers’ liability to pay their commission employees for unpaid “recovery” and other “non-productive” time extends all the way back to July 1, 2012! There is, however, a “safe harbor” provision that allows a payment to commission employees equal to 4% of their total wages earned from July 1, 2012 to December 31, 2015 (payable by December 15, 2016 and after notice to the State of California by July 1, 2016).
Here’s An Example
To illustrate the new law, the following facts are derived from a real life case.
(Note: names have been changed to protect the parties’ anonymity)
Beautiful Hair, a California salon, hired Ms. Chic to work as a stylist and paid her on a “piece-rate” basis: whatever customers paid Beautiful Hair for services performed by Ms. Chic, she received a 30% commission. Ms. Chic was not paid for the down time between services and was not allowed to leave the salon between appointments in case there were any “walk-ins.”
A few years later, despite earning an average of over $50 per hour from commissions, Ms. Chic complained to the owner about not being paid for her down time. However, the owner told Ms. Chic that Beautiful Salon simply couldn’t afford to pay for hours not spent providing a service.
So, Ms. Chic sued.
According to California law, on-call or standby time at a job site is considered hours worked that must be compensated, even if the employee does nothing but wait for something to happen! Facing an expensive uphill legal battle, Beautiful Salon ended up paying a five-figure settlement to Ms. Chic, who later opened up her own salon with the proceeds.
Be Proactive
If you’re a California salon or spa that pays, or has paid, employees on a commission-only basis, the new piece-rate law exposes you to substantial liability and we recommend you seek qualified legal advice immediately regarding the new law’s “safe harbor” provision and compliance requirements, as these are time sensitive issues.
Although we do not recommend paying your employees on a commission only basis, you should consider the following if you decide to continue using this employment model:
1. Implement a policy regarding an hourly wage for recovery and other non-productive work time, and make sure that employees know the policy. Accurately track all scheduled and booked hours for each employee.
2. Make sure that you provide itemized wage statements that contain a line item for non-productive work time, including pay rate, to comply with Labor Code Section 226.
3. Review daily time sheets, payroll data and wage statements to confirm that employees are being paid all wages, reporting time pay, standby time, non-productive work time and overtime.
Remember, Transcend’s payroll solution and employee reports, including booked and scheduled time reports, can help you gather the information you need to ensure compliance with this new law.
About the Author: Mark is a licensed California attorney and currently serves as counsel for Prosolutions Software, Inc.
DISCLAIMER: This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this article do not create an attorney-client relationship between Prosolutions Software, Inc. or Mark Wiggins Jr., Esq. and the user or browser.
