Enforcement Initiative to Combat Labor Law Violations at Seattle-Area Nail Salons

U.S. Department of Labor's Wage and Hour Division Focus on Employees Misclassified as Independent Contractors

The U.S. Department of Labor's Wage and Hour Division is conducting an enforcement initiative focused on the misclassification of employees as independent contractors at nail salons in the Seattle metropolitan area. The initiative aims to protect vulnerable workers in the industry from systemic violations of the Fair Labor Standards Act's minimum wage and overtime pay provisions by ensuring that they are properly classified according to federal law.

Common violations found in the nail salon industry across the United States, stemming in part from employers misclassifying workers as independent contractors or "booth renters" rather than regular employees, include failing to pay proper overtime compensation; failing to maintain accurate records of daily and weekly hours worked; paying a flat rate for all hours worked, resulting in minimum wage violations; failing to pay for hours worked for pre- or post-shift duties; and making illegal deductions for uniforms, equipment rental or other items that reduce a worker's regular pay rate below the minimum wage or cut into full wages due in overtime weeks.

According to the Washington State Department of Licensing, there are currently 24,898 active licensed manicurists in the state. Under this initiative, the Wage and Hour Division is conducting unannounced investigations. When violations are found, back wages will be collected for affected employees, and penalties will be assessed against employers. Nationwide, the division has collected more than $688,000 in back wages for employees in the hair, nail and skin care industries over the past two years.

"Employers cannot simply absolve themselves of the responsibility to pay proper wages and overtime to workers by classifying them as independent contractors," said Ruben Rosalez, acting administrator of the Wage and Hour Division's Western Region. "Many nail salon employees are immigrants and particularly vulnerable to wage exploitation. While the Wage and Hour Division supports the use of legitimate independent contractors, who play an important role in our economy, employers in the nail industry must comply with their legal responsibilities to properly classify and compensate their workers. We are committed to ensuring a level playing field for all businesses and employers that abide by the rules."

The misclassification of employees as independent contractors is an alarming trend, particularly in industries that often employ low-wage, vulnerable workers. To further its efforts to combat this practice, the Wage and Hour Division signed a memorandum of understanding in September with the Washington State Department of Labor & Industries. The two agencies agreed to bolster their effectiveness by coordinating enforcement efforts and sharing information when unlawful misclassification is found, which will protect both workers and law-abiding employers as well as prevent losses to state unemployment insurance and workers' compensation programs.

Additionally, Secretary of Labor Hilda L. Solis signed a memorandum of understanding with the Internal Revenue Service last year that will enable the Labor Department to share information with the IRS regarding misclassification. This partnership is a win not only for law-abiding employers and for employees, but for taxpayers. Estimates show that federal, state and local governments lose billions of dollars each year in uncollected tax revenue resulting from misclassification.

As part of its nationwide focus on misclassification, the Wage and Hour Division also will partner with industry stakeholders, community and faith-based organizations, schools, training institutes, and state and local agencies to disseminate compliance materials and information about workers' rights to both employers and employees. The division encourages workers in the nail salon industry to report FLSA violations.

Under the FLSA, an employment relationship must be distinguished from a strictly contractual one. An employee – as distinguished from a person who is engaged in a business of his or her own – is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular hourly rates for hours worked beyond 40 per week. Additionally, the law requires employers to maintain accurate time and payroll records, and prohibits retaliation against employees who exercise their rights under the law.

For more information about the initiative or the FLSA, call the division's Seattle District Office at 206-398-8039 or its toll-free helpline at 866-4US-WAGE (487-9243). Information is also available on the Internet at http://ww.dol.gov/whd.