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This Happens Far Too Often in the Spa, Med Spa, & Salon Industry, but it’s Just as Illegal as if it Rarely Happened.

If the majority of interviewees spoke up & put their foot down, we would effectively force this to cease. But, when some go with the flow while the rest say no, it will continue. Don’t do a disservice to your industry professionals by accepting employee misclassification. And if you should discover you are, speak up. And if this doesn’t work, please REPORT IT IMMEDIATELY!

I was reminded of this struggle as I was digging through old documents on my computer this evening, I happened upon a few drafted responses that I had’t realized I saved after sending.

I’ve worked for myself for many years, but occasionally I’ll pick up some additional work. This is when I’m often reminded that other businesses may not align with how I do business & it’s sad to see them muddy our waters.

I normally don’t respond or if I do, I don’t save the responses. 

I’ve changed my tactics by attempting to offer helpful advice whilst setting them straight so that if they continue to misclassify employees it’s not because they were unaware, but due to their intended acts of employee abuse & just being a self-serving dirt bag. I have some strong feeling about this, especially in an almost totally female operated industry where mistreatment is so common that many no longer recognize the abuse. Trust, this treatment in any other industry would have an employee contacting HR, an attorney, EEOC, & a reported & heads would be rolling. Treating women like employees, yet not paying taxes, worker’s comp, unemployment, benefits, etc. Oh, I could go on.

Since I stumbled on these, I thought it’d be entertaining to share the collection as I discover them whilst deleting old files & random documents in an effort to make some hard drive space.

And so this collection is, but two documents I discovered thus far. 

This Particular Instance was in Response to a Nurse who Decided to Start a Med Spa. She Posted on a Job Site and Interviewed Me, During Which She Wanted Me to Follow Her Menu of Services, Prices, Schedule, Collect Their Payments, etc: 

“With what you’re wanting to do, classifications have been recently been made clear by 5 governing entities that you will have an employee of which must be filed correctly.

These are direct quotes with links, but I HIGHLY recommend you speak to an attorney, submit your salon permit application & Texas health permit application, have your proof of salon insurance, get your sign permit (required by TDLR that sign fits specifications & required by Harris County that application is complete & permit is issued BEFORE any sign is displayed outside anywhere, & have your FIC #, Use Tax, Sales Permit, Occupancy License, & never forget to display your Inspection Reports so you’re legal when you open. All these & some others I can detail are ABSOLUTELY 100% REQUIRED to be displayed in plain visible sight. Remember that the ideas of what you want & how you want things to look, etc. are second to actually having a legal business entity. The details will come to fruition naturally, but not if it’s revoked for any violations. I see this happen more & more especially, with the independent contractor/ booth renter crackdown. Inspectors shut down three small businesses on my street alone in the past two months. Don’t go by the info prior to the new changes. Truly, I want you to thrive & hope you invest the majority of your preparations on the technical operation requirements of a business practice. Please feel free to reach out for clarification, guidance, or anything. None of this is based on opinions. This following is verbatim, but Texas attorneys have public info for you to refer to as well for additional reference. You should take your County documents to register your federal/IRS, then your SOS (Secretary of State), your insurance, occupancy license, sign permit next, and then TDLR, State Health Dept., wait for business license & sales permit, get the inspections (took about 8 months in Harris County, but took only 4 months in Montgomery Co) & the rest won’t take as long. Remember that terminology can get you in big trouble- until you have an actual employee under that status, words like boss, hire, employee, employer, schedule, part-time/full-time, etc. will break laws per labor, state, & federal because you are the client to whom the contractor is providing a [non-ongoing] service of which is not integral to your own business’ function(s). The independent Contractor is considered to be the company or business. You would be one of that business’ clients. I’ve started with the basics here because we all have to start somewhere & I’m certain you’re unaware of how these engagements operate. I hope you feel comfortable enough to ask about anything you need any help with. You’ll do well if you keep the horse behind the cart no matter how excited you are to open- so you can stay open & do well…and you will with patience, I’m certain.

The SALON Owner IS the Client to the Independent Contractor.

The BUSINESS Owner (Independent Contractor) You’re Looking to “Hire” IS the Independent Company Contracted to Provide Their Own Services on Their Own Terms.

“The person or persons for whom the services are being performed” are not the clients; they are the salon owners. The salon owners are the ones “contracting” salon professionals for their services. The clients themselves are the “services” (or jobs/assignments) the independent contractors are being contracted to complete. 

As you go through these, remember that when they use that terminology, they are not talking about the client sitting in the chair; they’re talking about the person who contracted you.

This is the legal operating order as we deal with law, State, Federal IRS, & correct terminology:

The Independent Contractor (The Salon Professional Offering Their Services) The IC Is Their Own Company Regardless If Their Business Is The Same As Their Own Name (Given/Birth) Or They Have An Additional Business Name/Fictitious Name/DBa (Doing Business as).

The Client (The Salon Owner) are the “services” (or jobs/assignments) the independent contractors are completing.

The Business (Esthetician/Aesthetician) like most, has more than one client- of course.

The Business Owner (Esthetician) Should Not Share Clients’ (Whomever Contracted Them) Information.

The SALON Owner IS the Client. The BUSINESS Owner IS the Independent Company Contracted to Provide Services.

The independent contractor classification seldom belongs in salons. Here’s a few questions the Independent Contractor will be asked when claiming their classification to the state & federal gov each time they file: If the salon professional is sick, can they call any other licensed professional and have them handle their appointments for the day?- Probably not. If the professional does not have the ability to delegate jobs to any other professionals at their discretion, they are likely NOT independent. The Independent Contractor may hire whomever they choose to assist or work for them without explanation as it is THEIR business.

Can a professional decide for themselves to interview and hire people to assist them without the salon owner’s consent? Booth renters and freelancers (Independent Contractors) generally can, because they are truly self-employed.

Is the professional expected to show up to work regularly and to remain loyal to one particular salon? Independent contractors retain their independence, which includes the freedom work wherever they please and offer their services to anyone willing to pay (including competing businesses).

If a salon professional classified as an independent contractor works a set schedule (determined days or times) that the salon owner established, that’s an indicator of misclassification.

If the salon owner puts an independent contractor on a schedule (full-time/part-time), has them sign a non-compete, or has them sign an employment contract, that independent contractor is extremely likely to be determined an employee. This factor indicates a significant degree of control that is highly inappropriate for the IC classification.

Is the professional required to perform their work in the salon owner’s salon or are they permitted to service the client at their private studio or anywhere else so long as it’s also inside a licensed, board-approved salon facility. In most states including Texas, salon services must be performed inside a licensed, board-approved salon facility. However, a truly independent contractor will generally have the ability to perform the service wherever they please (so long as the place they choose is also inspected & approved & compliant with applicable state board regulations).

If a salon owner has you listed as an independent contractor for tax purposes, but still treats you like an employee, i.e. controls your schedule or client scheduling service, has access to your client’s contact information or personal data including charts, controls access to the building, runs all the payments for services and pays you commission, you are instructed by the IRS, DOL (Federal Department of Labor), and your state labor board to report the crimes (tax evasion, wage theft, and labor abuse) and the salon owner will be required to pay your back wages, back taxes, and face very stiff penalties. They may be forced to cease any further business operations until legalities are cleared IF they are allowed to open again. They will also be penalized and publicly reported by law by TDLR (Texas Department of Licensing and Regulations), The Cosmetology Board, DSHS (Texas Department of State Health Services), Texas Health and Human Services – The Drugs and Medical Devices Group (within DSHS), and all other governing  regulatory entities that oversee each and every different service you offer in the business location.

Commission-only generally isn’t legal unless the owner is auditing the hours worked against the commission and ensuring that the workers are making at least minimum wage and making up the difference if not.

When the IRS talks about an independent contractor who is paid commission or by the job, they’re talking about people who come into a random business, do a job that needs doing that is not integrated into that particular business, do that job without any outside interference or direction, and leave with their payment with no expectation to return.

If a salon professional is getting paid at regular intervals or regularly by the salon owner, they are most likely an employee and must be compensated and filed as such. This is one of the most common reasons salon owners lose their businesses at best, prosecuted at worst.

The Independent Contractor will be asked if the salon owner requires or requests a professional to use a certain set or brands of tools which the salon owner provides, that professional is an employee. Most of us buy our own tools, but “materials” are usually furnished by the salon. So, if the salon owner requires a professional to use a particular product line or type that they provide, that professional is not truly exercising independence, even if the salon owner requires the professional to pay them for the privilege of using their chosen products.

TDLR posts Labor Law PSA’s warnings about accepting labor abuses under the guise of “industry custom”. It is not customary to be exploited by your “employer” just because some owners conveniently believe the same misinformation.

PLEASE refer to: https://www.thisuglybeautybusiness.com/2014/05/the-20-factor-irs-test-why-independent.html

Commissioned Employee is the appropriate classification the salon owner would be required to file otherwise & would be required to pay the difference per anything less than minimum wage, deduct taxes, & offer all required employee supplements.

“Whether it’s intentional or not, misclassification is a crime. Improperly classifying salon employees as independent contractors makes it easier for exploitative salon owners to commit other crimes against their workers, like wage theft. Believe it or not, state and federal governments take tax evasion, wage theft, and labor abuses pretty damn seriously. They take them so  seriously they team up and perform joint investigations. Whichever agency is initially alerted (whether it’s the IRS, the DOL, or your state labor board) will alert the two others. They will join forces in what’s called a “three pronged investigation.” (I call it the Hell Trifecta.)

This is a big deal. The penalties are extremely severe. (I would know, I collaborate with the attorneys of salon owners to help them navigate audits and labor investigations for a living.)

Unless you are truly a freelance gypsy professional, following the money wherever it may be and setting your own terms working under your own brand, you are likely not an independent contractor, and no salon owner will be able to twist the truth enough to justify tax evasion and labor abuse with the IRS.”

That’s from this must read: https://www.thisuglybeautybusiness.com/2017/01/know-your-rights-in-salon-employee.html

If you pay a percentage of sales instead of a set monthly rate: As a rule, your rent should not be variable since the value of the space doesn’t change from week to week. if you’re new talent just out of school or you’re getting back in the game after a long time out, it may be beneficial for you to start out on profit-share (paying sales percentages) in lieu of fixed rent during the time you’re building.

Keep in mind that if you are an Independent Contractor, you are still required to provide your own products, manage your own books, and promote yourself, so your rent should reflect that (you should be paying out 15-20% AT MOST).

If you’re an established pro and the owner wants 40 or 50% of your commission as booth rental–you’re getting screwed. Get out of there.

Owners, in five out of six IRS revenue rulings, salon landlords who took a percentage of gross sales in lieu of rent were determined to be employers; not landlords. If you don’t want to find yourself in a position where you have to pay back wages, back taxes, and penalties, avoid the practice and take a flat rental amount, hand them their key so they may handle their own business.

“Do I have to carry my own salon insurance?”

Technically, yes. Salons provide general liability and property insurance while the booth renter is asked to provide their own professional liability. Many salon owners will provide professional liability insurance as a courtesy, however. Check with your salon owner to make sure that you are covered. If not, shop around for a plan. Quickly.

“The owner wants me to use her receptionist and scheduling system and have my clients pay at the front desk. She is then going to write me a check for my amount. Is this legal?”

DO NOT. ABSOLUTELY NOT! This puts the salon landlord in an extremely legally perilous position. Your clients pay YOU. They book appointments with YOU. Do not allow anyone else to handle your client’s or your money for any reason! You are a self-employed business owner. Keep your business handling separate from the salon owner’s.

“Can the owner make me stay if I have no clients?”

No. You are an independent contractor. You are not required to do anything other than the services you’ve been contracted to perform.

“Can the salon owner make me sign a non-compete agreement, making me exclusive to that establishment?”

As an independent contractor, you can work at every salon and spa in town if you want and freelance on the side. You are not obligated to any of them.

“Am I required to perform work I’m not getting paid for? (Like answering phones, cleaning, and folding towels)?”

Independent contractors perform services. That is it. It is courteous to pick up after yourself and leave the treatment area in the same condition you found it, but outside of that, those jobs are the responsibility of the salon owner.

“Am I required to supply my own product and equipment?”

If you prefer to supply your own product and equipment, you can, but it will be at your own expense. A salon owner is not required to cater to your preferences. However, you can (and technically should) charge the salon owner for the product expenses.

“My boss doesn’t do payroll. They pay cash out at the end of every day or week. Is that legal?”

It’s shady. If they’re not doing payroll and they’re paying you cash, they’re not claiming you as an employee. Your taxes aren’t getting paid and they’re putting you in a bad situation. In addition, many states have laws regarding how payroll is handled and reported to the employees of a particular establishment.

An independent contractor must be provided with a 1099 from the salon owner. Since 15-30% of her earnings technically belong to the IRS for being “self-employed”, an Independent Contractor making 50% is actually making 20-35%. The 15-30% deduction should be factored into actual profit/loss.

Come tax season, common practice for anyone classified as an “Independent Contractor” since the past 2 years is to fill out Form SS-8 so as to confirm their filing status is correct & it will be questioned by 3 entities since they recently joined forces to prevent illegal misclassifications. See here: https://www.irs.gov/pub/irs-pdf/fss8.pdf

Shana Na, Licensed, Board Certified, Laser Professional (CLHRP), Medical Aesthetician, BioMedical Engineer, Laser & Energy-Based Device Educator & Instructor

NuYu Aesthetics™, the delicate balance of art & science ~since 2004

NuYu Aesthetics offers a host of Professional Products & Supplies & the widest array of Medical Aesthetic Specialty Services from Device & Procedure Training Education to Med Spa Treatments! We’re also home to NuYu Nique Boutique, an extraordinarily unique retail store conveniently located next door to NuYu Aesthetics Medical Spa!

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