Those who have been independent contractors or “gig” workers in California are familiar with Assembly Bill 5 (AB5). This is a legislation that went into effect on Jan. 1, 2020, and is supposed to regulate companies that hire gig workers such as Uber, Lyft, and DoorDash to reclassify them as employees. Under AB5, independent contractors must pass the strict three-pronged test (ABC Test). This caused issues for many independent contractors who did not consider themselves an employee and could not pass the ABC test. So in September 2020, Assembly Bill 2257 was passed, which rewrote a number of the requirements of AB5 and exempted a substantial list of job categories. Instead of the ABC Test, they must pass the Borello Test, which is not as strict and is used by the IRS.
Under the Borello Test, the most significant factor is whether the hiring company has control or the right to control the worker both as to the work done, the manner, and the means in which it is performed.
Then on September 30, 2021, AB1561 passes to amend AB2257, which allows licensed barbers, electrologists, cosmetologists, manicurists, and estheticians to qualify as Independent Contractors if they meet the Borello test and also:
(ii) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.
(iii) Has their own book of business and schedules their own appointments.
(iv) Maintains their own business license for the services offered to clients.
(v) If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.
(vi) THIS SUBPARAGRAPH SHALL BECOME INOPERATIVE, WITH RESPECT TO LICENSED MANICURISTS, ON JANUARY 2025
This last subparagraph (vi) only mentions “manicurists.” Why are manicurists singled out? Cosmetologists, Barbers, Estheticians, and Manicurists are all licensed and governed by the same State Board of Barbering & Cosmetology, so why do manicurists become inoperative under AB5 exemptions on January 1, 2025, and not the other licensed techs in the industry? Is this discrimination against manicurists?
Financial Summit Inc., which contracts many licensed manicurists for salons in Southern California, became an advocate for manicurists due to the passing of this discriminating provision. When Financial Summit Inc. went public and drew attention to the unfair law, they were singled out and audited by EDD as a form of government retaliation. Financial Summit Inc. provided evidence to satisfy the Borello Test and requirements under AB1561 but was still fined $178K for 2017-2019, for the years conveniently right before the AB5 law passed.
Financial Summit Inc. had provided written contracts between them and their 1099 techs which were reported to the IRS. Each of the licensed techs under this contract had to provide their own liability & malpractice insurance. They were given their own keys to access the salons at any time and made appointments with their clients directly. The techs set their own schedules, bought their own tools and supplies, and charged their own rates.
So when Financial Summit Inc.’s attorney contested the fines, EDD threatened to audit 2020-2023 as well, even when the current AB1561 law allows licensed manicurists to qualify as Independent Contractors until 2025. Therefore, this action by EDD against Financial Summit is an act of totalitarianism.
A new bill AB1818 has been proposed by Senator Janet Nguyen to delete the January 1, 2025, inoperative date, thereby making licensed manicurists subject to this exemption indefinitely. You can fight the discrimination and help pass this bill by visiting https://fastdemocracy.com/bill-search/ca/20212022/bills/CAB00024067/#billtexts to vote and provide public comments.
