ASHLEY: Welcome to Outgrowth: A Slice of Pro Beauty with your hosts Ashley Gregory Hackett.

JAIME: And Jaime Schrabeck. Despite recent legislation, repeated warnings, and attempts to educate the beauty industry, many salon owners fail to accept the legal and financial responsibilities of having workers. 

ASHLEY: From commission-only pay to product charges, wage theft has become so common that beauty pros don’t even realize that they’re victims. What can we do to stop the exploitation? Let’s grow together.

JAIME: Ashley, this subject has been one I’ve been waiting to tackle, and I don’t know why we waited so long.

ASHLEY: It’s definitely something that is coming up in legislation and conversation around the industry. You’re right. It is well past due. It’s a topic that we don’t love to focus on as an industry, but unfortunately, the lack of focus has led to a lot of exploitation.

JAIME: This truly is the ugly truth about the beauty industry.

ASHLEY: And it’s one that we can 100% avoid if we have the correct information, and we’re armed with the right things to do, and how to react, and how to recognize if this is actually happening to us.

JAIME: Or if we might be doing it to someone else. 

ASHLEY: Yeah. There’s so much bad information, and third-hand past experience, and well, this person does it this way kind of conversation that unfortunately, as we’ve covered in previous episodes, we do have a tendency as an industry to let some of the most important decisions about our business be crowdsourced, or asking someone’s relatively unprofessional opinion. And it just snowballs into an industry that is rampant with poor labor practices, bad employment decisions. And it’s gotten so bad that we just have to shrug and say, well, that’s how it’s always been. And I think we can demand better.

JAIME: Yeah, we need to stop struggling because coming out of this situation will be the only way that we can protect our industry from burdensome regulations. 

ASHLEY: Left to our own devices, if we can’t seem to get it right, unfortunately, the government will step in and enforce what’s already on the books. And I don’t think anyone wants to get to that point because as we’ll discuss, some of these penalties are stringent. It’s time for us to wake up and understand that if you can’t afford to pay your employees, then you don’t really have as good of a business as you thought. And um trying to find a loophole or a way around, it will not work and unfortunately, now could potentially land you in jail.

JAIME: Yeah, that’s something that we’re facing here in California and we’ll talk about that new proposed bill a bit later in the episode. But just to set the stage, this is not something specific to a particular part of the industry or a particular ethnicity in the industry. And I think that’s been one of the biggest hurdles to overcome is that we think of this in terms of, oh, well, that only happens to a certain group of people. 

ASHLEY: And it could never happen to me as you sit without a client not getting paid. I think that’s a really important preface that you’re making there. That this is not something that is limited to one specific ethnicity or one specific type of salon, whether it be budget, or nonstandard, or whatever the words are that we want to use. This happens in some of the most luxurious day spas filled with famous artists. It’s just so ubiquitous that it’s, it’s really become the norm. So let’s talk about what exactly we’re talking about when it comes to wage theft and exploitation.

JAIME: That’s such a good question, because I don’t think people understand how much goes into this. When you’re compensated working in a salon, it’s more than just what shows up on your paycheck, because when you’re working for someone else, there are so many laws that relate to  withholdings and tax payments, and then payments into the unemployment insurance and workers’ compensation insurance that all of that adds up and represents what amounts to a theft of wages. Anything that you’re owed by an employer that you’re not being paid would constitute theft of wages. 

ASHLEY: It’s funny because when you hear the term wage theft, to me, I picture someone pocketing a tip or somebody putting the commission for a retail sale to someone else. Wage theft is not somebody tying you to the railroad tracks and laughing maniacally as they steal your wages. Wage theft is something that can also happen inadvertently.

JAIME: It can. And that’s where we have to be careful because mistakes happen. But intentionally stealing wages because you are too ignorant of the law to know what your responsibilities are as a salon owner, that does not get you off the hook. 

ASHLEY: Right.

JAIME: So for example, if you had a mistake on a payroll,  where a number got inverted and instead of paying them for 38 hours of work, you paid them for 28 hours of work because there was a typo, that is not considered intentional wage theft. 

ASHLEY: Sure, and the inadvertence that I was referring to is running your business based on bad information. And I think when we go through some of the examples of what actually is constituted as wage theft, we’re going to see a lot of big eyes and a lot of gasps because this is something that you could walk into almost any salon in the country and find, whether it be labor misclassification, or a commission structure that only favors the salon because it doesn’t meet the criteria for what is federal minimum wage. We’re going to go through all of these examples, but just know that if you are a salon owner, and you hear yourself in this episode, we do have some previous episodes that we will link to where we speak to a tax professional who can explain what to do to extricate yourself from this process and we’ll link those in the show notes.

JAIME: Right. I think this episode brings together many of the other episodes that we’ve had where we’ve talked to experts, we’ve talked to a payroll expert, we’ve talked to a CPA, we’ve talked to an attorney, but when it comes right down to it, what we’re trying to avoid is having ourselves described in this episode. I mean ultimately that’s the goal is not see ourselves in this episode, either as the victim or as the perpetrator. 

ASHLEY: Definitely. But if you are, our doors are open. Our comment section is open. We’d love to hear from you and see how together as a community we can start to combat some of this wage theft and it is theft. At the end of the day, it is theft. It is wages that you are owed, that are yours. And if they’re not ending up on your check, we’re going to talk a little bit about what you can do. So let’s talk about wage theft  in labor. It’s a blanket term, right? It’s something that applies to all businesses that pay employees, or have workers that they pay because it gets a little tricky when you start using the term employee, right Jaime?

JAIME: It does get tricky and we don’t tend to use the word “worker” in our industry, but that’s essentially what someone who’s working in a salon is unless they happen be someone who is in a legitimate relationship where they are an independent contractor paying rent to the salon owner. If you’re not that person, you’re an employee. 

ASHLEY: Yes, and then we can slide down the slippery slope of assistants, and interns, and it gets, the telescope kind of pulls out further and further, but let’s talk also about the different forms of wage theft that may be present in our industry.

JAIME: I think first and foremost is that whole issue of being misclassified in the first place, being told that you’re independent, that you’re a 1099 as if that’s some sort of designation of who you are as a person, as opposed to a form that gets filled out. And we’ll talk about when that’s supposed to get filled out. That’s the biggest issue is being told that you’re independent when in fact you’re an employee in terms of the amount of control that the salon owner has over how you work. 

ASHLEY: And in general, this is presented as a great option because, oh, you’ll pay less taxes this way and you’ll be able to get paid under the books, or not have to claim all of your cash, or whatever. This is a situation that benefits the salon 100% of the time because, as we’ve learned in past episodes, not only do you have to pay both your portion and the employer portion of your employment taxes, but you’re considered self-employed. So the percentage actually goes up. And if you’re not claiming your cash, or any cash services, or cash tips, what happens down the road if your car breaks down and you need a new auto loan, or what happens in a year, five years, 10 years, when you want to buy a house and you can’t account for your income? If you are presented a 1099 as a relationship for your salon where you are told what hours to be there, you are given a uniform. There’s so many different factors and there’s  a whole list you can go through. Being given a 1099 by a salon owner is not a legal classification of labor. I think we need to say that again.

If you’re handed a 1099 from your salon owner, that is not a legal situation for anybody.

JAIME: And I am pausing for effect because I think that is one of those statements that might get a lot of attention. And it’s again, so common in our industry that everyone assumes that it must be legal, that somehow this industry is different from every other industry, every other real work experience that you have, whether it be in fast food, or retail, or any of the other places that so many of us might get our first jobs. The beauty industry is not different. It is not special. There isn’t anything in the law that allows for the beauty industry to treat individuals any differently, except for in the state of California where not only does it make very clear what constitutes being independent, it goes beyond what the IRS has at the federal level for those factors that would determine whether you’re independent or not. It makes it very, very clear. And that’s what happened with our exemption in AB 5. It really laid out that, in fact, to be independent and rent space in a salon, you have to issue the 1099 to the salon owner for the amount of rent paid, which those of us who know how this is supposed to work already knew that.  

ASHLEY: Yes, and I only think back to when you say something to that effect in one of your classes and the faces in the crowd of, what? That can’t be right. Because I’m given a 1099 by my salon owner and I am technically an independent contractor, even though I don’t have keys. I don’t set my own prices. I don’t process my own payments. I have to use the retail line they have, the backbar line they have, the color line they have, what have you and these aren’t mutually exclusive terms. There’s, there’s an asterisk by that because there’s so many different factors that whether on the federal or state level would determine whether you’re actually an employee or not. But here’s a great way to think about it. An independent contractor is, let’s say you’re building a house, right? And you have a general contractor who’s the builder and they hire in independent contractors to do other jobs that they don’t do like plumbing, or electrical, or whatever. That’s considered correct because what the independent contractor does is not under the scope of practice of the builder. So if they have to bring in a plumber, and they pay them for it, and they hand them a 1099, that’s how that works. In a salon, there’s nothing that you could be doing in your services that doesn’t fall under the scope of practice of a salon. So you really can’t be considered an independent contractor because you’re not performing a service that they don’t do. And I know that’s a double negative, and I don’t want to create any more confusion, but if you were to bring someone in who was like your accountant, or your attorney, or someone that you have brought in as a business consultant, those are legitimate examples of an independent contractor for a salon business. Just because the salon owner doesn’t want to pay their portion of your employment taxes, that doesn’t automatically make you an independent contractor. And going back to something you said earlier, Jaime, about the salon industry not being special or different. I feel like because we get licensed, we feel like we stand apart from typical entry-level workers. And using some of the examples you used like fast food, and retail, and things like that, it’s almost like with this license comes the ability to be exploited. Like we feel like there’s just some extra level that we’ve achieved by having this license that means that we can operate in this gray area and find these loopholes that your brother’s college roommate’s cousin who happens to also be an accountant told you you could do. If you’re trying to exploit a loophole, you’re also exploiting your workers.

JAIME: The creativity that individuals apply to their work, they apply to employment and that’s where we get it so wrong. 

ASHLEY: So wrong.

JAIME: We’ve seen many different examples that just blow our mind and it’s like, and you thought that was okay? 

ASHLEY: Yeah.

JAIME: But as you mentioned previously, when I mention that in my classes, it’s not meant to be the subject of the class. It’s just an offhand comment that gets their attention. But often they’ll come up to me afterwards and say things like, you know, I never thought it was right that I spent 40 hours a week at the salon, but I only got paid commission for the services I did and our salon is just not that busy. 

ASHLEY: Well, and, you know, from my own personal experience, when people say, oh, did you work in a salon? And I say, yeah, for two weeks, because my first job out of nail school I got because one of my classmates recommended me for it. It was in a full service salon that was just starting their nail department up again. And we were told that we were paid only when we had a service. I was given a W4 to fill out. I was considered a W2 employee. So the labor misclassification part wasn’t happening, but I’m thinking if I’m making 40% commission on a $20 manicure to the tune of 12 bucks. And when I don’t have a client I’m making zero, how does anybody make any money in this business? I couldn’t reconcile that math in my head. And I thought if this is what the salon business is, I am absolutely going out on my own because I can set my rate. I can find my clients. I mean, they weren’t even advertising the fact that they had a nail department again. So we just sat there and I was told, well, you should be hustling and talking to color clients while they’re processing and offering them nail services. And I’m thinking the hairstylists here won’t even look at me. How am I supposed to know whose client belongs to what stylist? It was bedlam and it’s an experience that has really shaped and colored everything I’ve done in the industry since then because I can only empathize and sympathize with people who find themselves in that situation and feel like they don’t have other options. And so let’s talk about commission only pay, because I know this is a subject you know very well.

JAIME: Oh my goodness. Well, and you’ve given an example of that. The commission-only pay situation is such that it undermines the fact that we are hourly employees. We are not supposed to be paid a salary. We’re not exempt in that way where we’re in a manager role and we’re not actually providing services. So if you’re offered a salary position in a salon, you better not be doing services. So let’s get that out of the way first. So what’s the commission on? Well, the commission would be on performing services, except that’s not the way commission is supposed to work. Commission is supposed to be paid on things that you sell, not services. So if you’re selling an insurance policy or whatever, now, again, we’re making comparisons to other industries, but when you’re selling something tangible, that is something that you could earn commission on, but not when you’re selling services. 

ASHLEY: I was personally a salaried exempt manager in retail overseeing and the direct supervisor to people who were hourly versus commission in the shoe department, in the men’s suits department. These are people who would make a commission percentage on their sales, selling tangible goods. And had the incentive to upsell, and to add on, and do all of those things in order to get their commission higher. But when we were all just sitting around looking at each other and there were no customers in the store, they were still being paid at least the federal minimum wage. And so I had certain associates that were making 30 and $40 an hour because they were great salesmen, and they had built a clientele book, and they had done all of those things to help supplement the times when there wasn’t a lot of traffic. And so I think if we can make that parallel and look at what is being exchanged here, when you’re doing a color service, or you’re doing a set of lashes, or whatever, you have really just a finite amount of time, right? So you’re capped at how much you can possibly make unless you’re some type of retail superstar and you’re upgrading every service which is just not realistic. So it should kind of start to prickle in your brain a little bit. How, how do I succeed at this if I’m only making commission off of the bodies coming in the door? And for most of us, if you’re in a commission-only pay situation, you don’t have the control over the marketing and advertising of the business so you’re really beholden to every time that door opens.

JAIME: Right, and shifting the responsibility off for marketing, and engaging clients, and trying to encourage them to purchase more or invest more in their services, that’s the responsibility of the salon owner, not an employee. 

ASHLEY: Well, and we’ve all seen those, those help wanted ads saying, must have a clientele, must bring a clientele. That’s not, that’s not how that works. That’s not how any of this works.

JAIME: Or that we’re hiring ads when they’re actually renting a space. 

ASHLEY: Yes. There’s this conflation of terms between hiring, renting, and it’s sort of like, I always say there’s no uniform nomenclature or terminology in the nail industry, right? A gel nail could be one of 50 different things. And I think that there could be parallels made for hair with a balayage or whatever. It could mean so many different things. It’s become kind of like the Kleenex of the beauty industry. But when it comes down to it, we start interchanging these terms to make them mean the same thing when they absolutely, positively do not.

JAIME: You cannot be paid commission and be independent. 

ASHLEY: Thank you. Can you say that again so everybody in the back can hear it?

JAIME: You cannot be paid commission and be independent. Commission equals employee. 

ASHLEY: I think a lot of cars just got pulled over because this is, I think every advertisement I’ve seen for someone hiring is commission with blah, blah, blah, or this percentage commission, or posts where someone is saying I’m just out of school. What, what commission percentage should I expect? I don’t understand why this is where the conversation goes 100% of the time.

JAIME: I think it’s just, again, an indicator of just how prevalent these practices are in our industry and how salon owners have not been held accountable. 

ASHLEY: That is very true. And we know there’s examples of people that we’ve spoken to in private messages, and you have in your consulting in the past, where people have been able to successfully extricate themselves from those situations or have been able to bring their situation to the attention of the proper authorities. And it’s created just a huge issue for those employers and those salon owners. Let’s talk as well about another form of wage theft swinging wildly to something I see as well. Even just today, you sent me an example of a job listing where it lists a daily rate where you can make this amount per day.

JAIME: Again, we are meant to be paid a minimum hourly wage. That’s by the hour. We can all agree that an hour is 60 minutes long and that there are only so many hours in the day that we can be worked without having to run into issues of overtime, or needing meal or rest breaks depending on what your state laws are. So to tell someone that they’re going to get a day rate undermines that again, because we know from having conversations and just from our own personal experience, that we are meant to clock in and out each day. We can’t just show up and work a certain amount of time, and then leave, and then expect a nice round number as our pay for that particular day.

ASHLEY: Especially for somewhere you are going every day. I make a day rate as a session manicurist because I am a true independent contractor on a production where a producer hires me to do nails for a commercial, or TV, or whatever. It’s because what I do is not under the scope of practice of being a film and TV producer, right? So it’s a true independent contractor relationship. I make a day rate. I set that rate. I communicate it whether directly or through my agent. But if I were going there every day and this is my place of employment, this is where I identify as being a member of that team, that’s not a situation I would ever find myself in because it’s not correct. And I know keep referring back to that factor list, whether it’s from the IRS, or it’s the AB test, or all of the things happening in California that are basically, I’ll just put a big asterisk over that state. But when it comes to being paid daily rate, that was one of the things that we read about in that 2015 expose֒॔ of the nail salons in New York and New Jersey, exploiting their workers, paying them $60 a day, but never allowing a meal or rest break, working 12 hour shifts. Obviously that’s much lower than the federal minimum wage.

JAIME: Right, and how can you account for what you’re owed if you’re not clocking in and clocking out? And those are some of the requirements that we know exist for salon owners or any business owner who has employees just by virtue of the wage and hour division in the Department of Labor. 

ASHLEY: Let’s talk a little bit about what happens when you don’t have a client and how compensation works for that time.

JAIME: Yeah, this is something that we see frequently. And I know that when we first have these discussions with people who are not familiar with this industry, they’re shocked to find out that employees are sometimes, or maybe more often than not, forced to clock in and out around appointments. 

ASHLEY: Yes, frankly, it’s shocking because I personally believe if I’m not clocked in, I’m not protected under the liability insurance. I’m not afforded the protections of what being an employee would mean if something were to go wrong. So if I’m not clocked in, and I fall down and bonk my head sweeping the floor, who’s to keep the salon owner from saying, I don’t know? She just walked in off the street. She’s just a member of the public, like she’s not entitled to worker compensation. It, it, there’s just so many things to me that feel very wrong about that.

JAIME: Being an employee shouldn’t cost you anything. So if you are spending your time, that’s the time that needs to be compensated whether you’re with a client or not. It doesn’t matter how you’re spending that time. When you’re on the clock, at work, whether you’re sitting there reading your phone, or you’re cleaning, or you’re doing laundry, or you’re attending a training or a meeting, it doesn’t matter what you’re doing or even how hard you’re working. That’s the other thing that really frustrates me is like, oh, well, these, you know, these people aren’t working hard enough. It doesn’t matter how hard they work. The fact that they’re there, just there, means you have to pay them. 

ASHLEY: Yes, and you can have performance management conversations around how hard they’re working, but you still have to pay them. You still have to pay them. And that was something that I, a previous employer of mine got in trouble for. It was the store where you go to buy a lot of candles and hand soaps. Yeah. And you wear an apron if you work there. And as a manager, I was in charge of the hiring for the store. And part of the interview process they came up with was having the conversation, and the questions and the answers, and stuff in the back of the store, and then giving the applicant an apron, putting it on them, putting them on the floor, and giving them an audition, and having them speak to customers, and try to sell things. And it became a class action suit where those applicants became a class and were given damages for unpaid labor. 

JAIME: Wow. 

ASHLEY: It’s wild to me that a company that big can make such a poor decision, but it also just shows how easy it is for a much smaller business to make just as poor of a decision with unfortunately smaller ramifications which means they can continue to operate this way.

JAIME: And as a business owner, if you can’t afford to pay employees when you’re not making sales or serving clients, you shouldn’t have those employees.  

ASHLEY: Thank you. I wholeheartedly agree with that, Jaime. And it’s something that I’m seeing in lots of different industries, especially now with the conversation around returning from COVID and people saying, well, there’s a worker shortage because people are making more on unemployment. No, they are not. And if there’s a question, you’re not paying your employees enough. If there’s a question of whether or not I would leave unemployment to come back to a job where I am exploited, misclassified, treated poorly, and not compensated legally, or not compensated in a way that is on par with inflation and cost of living. Yeah, I’m not going to make that decision. And so don’t call it a worker shortage. Call it a wage shortage. You’re not paying people enough. It should be a no-brainer for people to want to come off of unemployment for whatever reason they’re on it to begin with. The past 18 months we’ve had as a country have been difficult for everyone. And so I find that argument toothless and in poor taste, and I think we need to get away from this idea that, you know, human resources and things like that, like we just need labor. There’s, there’s people behind that. There’s lives behind that. There’s faces, and families, and all of these other things. And we can, I can go on this rant a different time, but if you can’t afford to pay people the minimum hourly wage mandated by the federal government, then you should not have employees. And that doesn’t mean you find the loophole and call them independent contractors either.

JAIME: Oh, my gosh. That’s so true. And if you can’t afford that, you need to look at what you’re charging your clients, and how you’re scheduling, and there’s, that’s again, a whole nother conversation about how to do it the right way, and how to only staff as many people as you can afford to, and not worry so much about being able to say yes to everyone who calls the salon looking for an appointment. You don’t have to have people hanging out, just waiting to be involved in a service when you can’t afford to pay them to wait. So we’ve got this long list of different forms of wage theft. So let’s sort of whip through some of these other ones. How about, Ashley, getting reduced pay when this salon advertises a coupon or sells gift cards? 

ASHLEY: This is something we saw a lot with Groupon, and Living Social, and some of those other things where if the salon is advertising their services at a highly reduced rate, somehow your commission is now based off of the reduced rate. And so you’re making on a service where first of all, you shouldn’t just be receiving commission anyway, but that’s been reduced by 30, 40, 50% as a promotion? No, that is not right. You should not, that should not affect how you’re compensated.

JAIME: Well, if you were working retail, and they were having a 50% off sale, and you sold so many more pairs of shoes because there was a 50% off sale, you don’t get less commission because of that. 

ASHLEY: Right. Your commission percentage stays the same. It never changes, and it actually goes up with how much you sell, and your seniority, and all of those other things. So it’s just bonkers to me that our industry cries out to be taken as professionals and to be seen as a legitimate industry full of highly trained, licensed professionals when we still pull this malarkey on each other and I’m going to keep it G-rated cause I don’t want to mark this episode as explicit, but oh man, do I want to say some other words.

JAIME: Well, we could say shenanigans and it starts the same way. Shenanigans.

ASHLEY: It’s bull-shenanigans, okay.

JAIME: I like it. I like it. So what about this whole issue of tips? Because you know, again, stolen tips, we see that frequently. 

ASHLEY: Incredibly frequently, where tips get pooled or tips become like some weird collateral against, like I’ll hold your tips until you’ve paid your back bar amount, or it’s just wacky. There’s, tips are paid to you from the client, and sometimes those tips can be administered by the salon or whatever. But as we discussed with our payroll professional colleague in a previous episode, the tips are reported. They’re considered income, right? So there has to be conversation around that you have to involve the salon owner in the amounts and all of those things because the salon owners should actually be paying FICA taxes on those tips. And so you don’t get the option of like total privacy around tips, and not disclosing the amounts, and things like that. But there should never be a portion of tips taken to cover credit card processing fees or all of those other things that really are just the cost of doing business as a salon. So if you’re experiencing something like that, that is actually wage theft.

JAIME: Right, because the way the client pays should make no difference to how you’re paid. 

ASHLEY: Exactly. Whether they’re paying in cash or they’re paying on 17 gift cards, several of which are expired, that has no bearing on how you’re compensated.

JAIME: So let’s move down to this concept of being charged for product or having to supply your own to perform services. 

ASHLEY: Right, if you’re not a renter and you have not signed some sort of lease agreement with a salon where you are truly independent, there should not be any product charges. I’ve seen such weird and wacky arrangements around product charges, as I’m sure you have as well, Jaime, or having to supply your own, like it’s like BYO shampoo. It’s really strange.

JAIME: And I’m not sure if it’s not a situation where the owner says, well, you know, you go ahead and work with whatever you are most comfortable with or whatever. You know, that’s not the issue. I mean, you would never bring your own restaurant supplies to your job in a restaurant. 

ASHLEY: Nor should you be expected to, as a condition of your employment. That’s wild.

JAIME: Yeah, and that goes back to my point that your employment should not cost you anything. It should not cost you to even wear a uniform. 

ASHLEY: True. It should be supplied.

JAIME: Yeah. I mean, other than getting yourself to work, you should not be expected to supply your own insurance, your own products, your own clients. Those are all things that the salon owner should be responsible for. 

ASHLEY: What about when you have a client who comes in for a service, you perform the service, and they decide they are dissatisfied after a couple of days, and they call back, and the owner decides to refund them the entire cost of the service,  and deducts your commission or your pay as well?

JAIME: Again, and you know this from retail, right? I mean, if someone were to make a mistake on the cash register, you know that doesn’t get dinged from your pay. 

ASHLEY: Or they buy a shirt that they decide they don’t like it, and return it, and that means I didn’t get paid for that hour? No, and as ridiculous as that sounds, that’s happening every day in salons. And I feel like I’m yelling into my microphone right now, but it’s, it’s wild. It’s wild. The scenarios that if you were to just plunk them out of the beauty industry, and put them into a different one, and you’d be like, what? That’s not possible. It’s just not how business is done, yet every day in salons around the world, this is happening over, and over, and over.

JAIME: And we haven’t even gotten to some of the more creative ways that this happens. And I’m sure that our listeners will have examples. I, I cannot wait  for the comments on Instagram about this, but let’s just run through some of the ones that are common to all industries, because we’ve really focused on the ones that are more specific to the beauty industry. But some of the more common forms of wage theft are that there’s no tax reporting, no withholdings, or payments. 

ASHLEY: That puts you in such a world of hurt. And I think a lot of us understood that when COVID started, and everything got shut down, and some of us tried to file for unemployment, and found that we couldn’t because we weren’t considered employees to begin with. And, and so come tax time, you have to kind of untangle this whole salad of facts, figures, numbers, to figure out just the most basic questions. If you have to do forensic accounting to figure out how much you owe in taxes, something’s wrong.

JAIME: Well, and the tax reporting that happens for business owners, it’s very straightforward. It’s been the law for a very long time. This is nothing new. And as an employee though, how do you know that that’s happening? Well, again, asking for verification from your employer would be in the form of your pay stub. You should be able to see where it’s broken out, what’s being withheld based on the form that you filled out, your W4 withholding certificate. And you would expect that those withholdings are happening, but then here’s the kicker, Ashley. You don’t know necessarily those payments are actually being made.

ASHLEY: Exactly, and I can guarantee that there are several people listening to this right now who receive checks with no pay stub, no remittance advice, or it just says like the date range, you know. It’s pay for this day to this day for these two weeks and that’s it. It doesn’t tell you what the gross was. It doesn’t tell you what the deductions were. You’re just seeing the net amount that you’re able to deposit into your account and that’s not correct either. You should be able to see the breakdown of the number of hours, the rate, the FICA withholding, all of the other things that come out of a paycheck. You should be able to see all of those deductions and line items that take you from your gross hourly wage to the net that you’re paid.

JAIME: Right, and then cross your fingers that those payments are actually being made. 

ASHLEY: Right. 

JAIME: Because I could, right, I mean, I could create a pay stub that shows these numbers, but I may be pocketing that money and not actually making those payments on behalf of my employees. 

ASHLEY: You sure could. That’s, that’s fun, isn’t it? That’s just neat. That’s if you’re doing something like that, then you know that you’re doing something wrong.

JAIME: That would be, yeah, that would be very intentional wage theft. 

ASHLEY: Yes.

JAIME: And will get you into tax trouble as well. It’s not just the employment law that’s at issue. It’s the tax law. Those two are intertwined.

ASHLEY: 100%, and we talked about the lack of unemployment or workers’ compensation insurance if you were to be hurt on the job, or injured, et cetera, that you would have really no recourse when it comes to taking care of yourself, or, or, your medical bills, or anything like that.

JAIME: Right? And so people think, well, you know, that’s not wage theft because that’s not actually money in your pocket. It’s money that is meant to be paid on your behalf to the state. Period. 

ASHLEY: Period.

JAIME: So that is a benefit of employment is that you have unemployment insurance and workers’ compensation insurance where it’s required. Now in some states, there’s the expectation that you get paid sick leave. I don’t know that that’s really happening in the beauty industry. 

ASHLEY: No, not even a little bit.   

JAIME: Well, this whole idea is if I’m not there to make the money to, doing the services, then I’m not gonna make any money. I mean, there’s just that whole mentality as if you were an independent person. 

ASHLEY: Right, and it’s become memeable at this point that beauty professionals never eat, and we just run on iced coffee, and acrylic fumes, or whatever it might be,  that you’re never given a scheduled meal or rest break in accordance with state law, that you’re booked from the moment you enter the salon to the moment you leave  and deal with it. It’s unfortunately I think a part of our American culture too to be very proud of the hustle, and to be constantly working, and that we wear our exhaustion as a badge of honor. But if you’re not creating your own schedule and you’re not scheduling or being scheduled meal or rest breaks, that’s inexcusable. And if you’re not taking those meal or rest breaks because you’d rather be with clients because you’re making commission, that is also negligence on behalf of your employer, because they must ensure that you are taking those meal and rest breaks, 

JAIME: Right.

ASHLEY: Not just putting them on your schedule, they have to make sure you’re taking them as well.

JAIME: Rest breaks are paid, meal breaks off the clock or not. And, again, if you’re being paid commission, can you imagine having to recalculate what you get paid as part of your rest break based on commission? It’s, it’s insane. So that’s why it just makes so much more sense to stick with an hourly wage that meets the minimum for your area because we, as we know, the federal wage is just the bare minimum and states, and some cities, have much higher wage thresholds. 

ASHLEY: And this is why it’s so important to track time with clock-ins, clock-outs, and things like that, because then you actually have a manifest of when you were there, not there, when you were on the clock, off the clock. And if you are making like an hourly versus commission type of situation, you have that information to be able to do, if you were to have to do an audit of that, you would have that information instead of just guesstimating, which a lot of salons are doing. There’s not a traditional time clock that you punch on the wall. Whether it’s done electronically, or it’s done through your scheduling system, or whatever, it needs to be happening.

JAIME: Right, and, and then lastly on our list,n this issue of no overtime, and working too many hours in a day or too many days in a week, for. 

ASHLEY: Sure.

JAIME: Yeah, or not being paid extra pay on holidays if that’s something that’s required by your state. You know there’s all these other issues that are very location specific. So it’s not enough to just sort of look around and see what people are doing elsewhere. You have to know what’s legal in your state. Ashley, this was meant to be just a one part episode.  

ASHLEY: It was, and we had so much to say about it, we definitely need to break this into two. So much more conversation to happen, I think, about wage theft. We’d love to hear from you so please feel free to send us a voice message on Instagram and we might compile those for a future episode. We can keep you anonymous, of course, or just let us know, like, do you have experience with being misclassified, with being part of worker exploitation or wage theft? We’d love to hear some more examples to help us better inform others in the industry of what to look out for.

JAIME: As always you can connect with us directly on Instagram at @outgrowthpodcast. 

ASHLEY: And I hope that you do. Go ahead and like, share, and subscribe and do all of the podcasty things. We really appreciate you helping us grow our audience. And if you’re enjoying Outgrowth, feel free to leave us a review on Apple Podcasts. You can do so with just one click. Visit bit.ly/outgrowthpodcast.

JAIME: Ashley, thank you for this discussion. I think it could have gone longer, but I’m hoping that we get some feedback that will allow us to explore some of these issues  in more depth.

ASHLEY: And it will go longer because part two of this conversation is coming next week. Make sure you tune in, and I hope that our listeners will take heed, and share this with anybody who needs to hear it to help them recognize maybe the situation they’re in. But until next week, be smart. 

JAIME: Be safe.

ASHLEY: Bye. 

JAIME: Bye.