Your Favorite Salon Has No Employees…Really?

Your Favorite Salon Has No Employees…Really?

 

We all frequent our hairdresser to get cuts, color, and other services.  Depending upon the structure of the salon, you may be surprised to know the salon may not actually have any employees.  According to the Professional Beauty Association, 90% of salons do not have any employees.  Hairstylists are typically classified as independent contractors and whether the classification is accurate depends upon the amount of control the salon owner exerts over the stylist.

 

 

 

While the IRS does not have a set list of factors that must be used in every circumstance, it does provide a general set of factors a business can utilize to determine if it has improperly classified an employee as an independent contractor.  These factors can be evaluated by asking some of the following questions:

 

 

 

  1. Who establishes when the salon is open?
  2. Who decides who works specific shifts?
  3. Does the stylist purchase his or her own supplies with his or her own money?
  4. Who determines the price to charge the customers?
  5. Do the stylists set their own appointments?
  6. Who is responsible for expenses such as insurance, advertising, etc.? 

    The more control the salon owner exerts over the above factors, the more likely it is the stylist is an employee and not an independent contractor.  Even if the stylist has signed an independent contractor agreement, it may not be worth the paper it is written on if the salon owner exercises too much control over the business of the stylist.  The Minnesota Department of Revenue also provides similar guidance to business owners in evaluating whether an individual is an employee or an independent contractor.

     

    Salon owners should consult legal counsel to help navigate the waters of classification of employees versus independent contractors.  Failure to properly classify an individual can be very costly should a stylist bring a suit for improper classification where they are entitled to back pay and overtime.  Additionally, both the MN Department of Revenue and the IRS can seek back employment taxes if it is found the individual was improperly classified.  When you tally these expenses, the cost in hiring legal counsel to properly set up your business and classify your employees is a wise investment.

 

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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