In Westminster and throughout Little Saigon, nail salons often serve as the heart of the Vietnamese business community. For years, many owners have relied on a booth rental model, treating manicurists as independent business partners. This traditional way of doing business faced a major shift on Jan. 1, 2025, when a specific legal exemption for the industry expired.
Why the rules for nail salons changed
In the past, California law allowed nail technicians to be classified as independent contractors under more flexible standards. This carve-out acted as a temporary shield for salon owners. Now that the extension has ended, manicurists are subject to the strict ABC test used to determine employment status for most other workers in the state.
Under the current rules, a worker is legally considered an employee unless the hiring business can provide evidence for all three of the following conditions:
- The business owner does not direct or control how the worker completes their daily tasks, whether by contract or in actual practice.
- The worker performs a type of work that is different from the primary services the salon offers to the public.
- The worker has their own established business or trade that exists independently of the work they do for the salon.
Failing to establish even one of these three prongs means the law automatically classifies the worker as an employee.
Risks of worker misclassification
For a typical salon, the second requirement is the most difficult to meet. Because the primary business of a nail salon is to provide nail services, arguing that a manicurist works outside the usual course of that business is a steep legal climb.
Misclassifying a worker can lead to significant financial trouble. If the state determines your technicians should be employees, you could be responsible for years of unpaid overtime, missed meal breaks and back taxes.
In some cases, Orange County business owners have faced penalties reaching over $1 million for these violations. This situation creates an urgent need for owners to review their business transactions and contracts to ensure they follow current labor codes.
Protecting your livelihood
The transition from a 1099 model to a W-2 model involves more than just a change in paperwork. It requires a complete rethink of how you manage your daily operations and payroll. Staying ahead of these regulatory shifts is essential for the long-term survival of any family business in our community.
An experienced attorney can provide guidance on how to structure your business to meet these new standards. Taking proactive steps now can help you avoid the stress of a state audit or a private lawsuit later.