Guest Post: What AB 1513 Means For You
Posted on 4th April 2016 by Danny LeClair
Amendments to the California Labor Code have been making waves in the salon industry. This week, Shortcuts client and Studio DNA owner Danny LeClair gives his insights into what that means for you in a special guest blog post.
As you may be aware, Governor Brown signed into law an amendment to Assembly Bill 1513, which adds a new section to the California Labor Code for piece rate employees. Piece rate compensation is considered any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed regardless of time.
Under the new law, effective from January 1st 2016, employers must pay piece-rate employees for rest and recovery periods (and all other periods of “nonproductive” time) separately from (and in addition to) their piece-rate compensation. You can read all about it at the State of California Department of Industrial Regulations website here http://goo.gl/AI0LVh.
So what does that mean for you? Some would argue it does not apply to commission salons since we refer to our compensation as commission, and you may be able to argue that distinction, but it doesn’t currently limit your exposure to lawsuits and penalties. Most reasonable estimates indicate that legal costs could exceed $100K and if you were to lose, you would be responsible for the employee’s legal costs as well.
This dangerous legislation is fraught the following significant problems for employers in our industry.
- Most salons pay compensation to ensure a livable wage and encourage growth. Some educate, grow and promote their stylists which costs time, money and resources. Adding an hourly compensation will decimate our already narrow profit margins.
- Adjusting the commission rate or piece rate to compensate for the hourly will harm your seasoned stylists in favor of your younger stylists.
- Developing a sliding scale structure to help mitigate the impact will create a complicated compensation structure that will have a greater chance of breaking down under scrutiny. Larger salons might be able to manage this, but for smaller operations this will extremely cumbersome.
- Non-productive time is not clearly defined. Does it mean time on their schedule not used to perform a service? Does it mean any time used to clean, prepare, follow up with a client? Can you write into employment policy a definition and have it stick? And what structures would need to be in place to monitor that time closely? Especially in the event that a service takes longer than expected?
- Back payments to July 2012 will bankrupt our industry since few salons of 10 stylists or less have cash reserves for such an event.
- This untenable situation has the potential to destroy the commission based salon model.
What is more disturbing is that this law was presented, passed and signed in October 2015. We have only recently been informed and more problematically, the law has been written regardless of industry and therefore, devastating to some and negligent to others.
It has always been my assertion that salon owners should coalesce if we have any desire to maintain this business model. Now, more than ever, it is crucial. We have for too long only come together in the face of a crisis and in response to a threat, but our very livelihood is dependent on ongoing and consistent dialogue.