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03/10/17
The Independent Contractor, 1099 Employee, “Booth” Renter
Filed under: General
Posted by: Vincent @ 3:27 pm

The Independent Contractor, 1099 Employee, “Booth” Renter


As you can see, it’s been some time since we’ve written anything on our blog. Truth of the matter is, we’ve been very busy.

My name is Vince. I am one of the owners of D’maj Beauty Salon. Today I want to share a concern of mine with all of you; independent contractors, 1099 employees, or “booth” (or chair) renters, as they are sometimes known.

D’maj Beauty Salon does not rent booths or chairs to hairstylists. With respect to hairstylists, we are an hourly and commissioned salon only. This means that the hairstylists in our salon work for us and not for themselves.

We have all heard of the “independent contractor” or “1099” employee and truthfully, I have no objection to this practice, as long as it is done within the confines of the law. If a stylist chooses to be independent, more power to them. It should be known, though, that when it is done correctly, it really isn’t all that.

According to law, an independent contractor is self-employed. The individual must file with the IRS to either receive a tax identification number, or to indicate that they will use their social security number as their tax ID number. In either case, they must be registered with the IRS.

Additionally, I called the City of St Augustine and simply asked, “does an independent contractor or 1099 employee working in St Augustine require their own business license” and the answer came without hesitation; “Yes, they are required to have their own business license and county business license.” The city employee went on to add,”…and the licenses must be displayed where they work or presented upon request of anyone asking.” I asked specifically about stylists renting a booth or chair…the answer was the same.

It goes without saying that the majority of stylists working in our community as independent contractors or 1099 employees, otherwise known as “booth” renters, are neither registered with the IRS or possess City or County business licenses. How long have we been told or should I say warned, to be sure that the people we contract with or that provide services to us are properly licensed?

What about insurance? One of the reasons we are constantly warned about independent contractors, is because many of them are not properly and adequately insured and in most cases, not insured at all. This means they possess no liability coverage.

Let’s face it, when you enter a salon for services, your expectation is that the people providing services for you are properly licensed and insured. The reality is, many of them are not. My concern is that no one cares enough to protect the consumer. It is all left to the salons to either conduct business the right way or not and unfortunately, most salon owners do not have the discipline to make themselves do what is right.

The cosmetology industry does nothing to regulate and police this illicit behavior. As an example, while D’maj Beauty Salon maintains very tight sanitary processes and adheres to strict procedural policies, our salon hasn’t been inspected by state officials representing the cosmetology industry in almost 2 years. I have called the Department of Business and Professional Regulation (DBPR) and asked for an inspection and they simply tell me that “someone will be out within a two year period.” I strongly suspect no one will be coming around from the state anytime soon. They almost seemed annoyed by my call.

On a local level, county and city officials do not seem to concern themselves with stylists that are conducting business throughout the county and the city without proper licensing. In essence, proper licensing comes down to being required only by those individuals wishing to conduct business lawfully and morally.

The reality is that if your stylist is an independent contractor, 1099 employee, “booth” or “chair” renter, the odds are quite high they have neither a business license to conduct business or liability insurance to help you in the event they make a terrible mistake while providing your services. State government, county government, city government; they have all left it up to you to heed the warnings we have received for decades about asking for proper licenses and asking for proper insurance coverage.

It’s a hassle asking for these documents because in many cases, it’s a bit outside our comfort zones. We all place ourselves, sooner or later, in circumstances we would rather not be in. Such as having to ask a person who has provided our haircare services over an extended period, to show us their license and ask if they have insurance.

Generally, the owners of salons that bring in independent contractors or that rent “booths” to stylists, are themselves properly insured and licensed, but the stylists renting the booth must have their own licenses and insurance. Further, to qualify as an independent contractor or 1099 employee or “booth” renter, the stylist must have full autonomy. Meaning they must be able to set their own hours, they must supply their own products, their own tools, collect their own fees, etc., unless they have agreed to a contract with the salon owners that specifies otherwise and the truth is, many of these stylists are functioning without such a contract.

Another reality check is that salon owners more often than not, treat the independent contractor or 1099 employee as a paid or commissioned employee, requiring them to use certain products and charge certain fees for services, as well as collecting the stylist’s client list in a digital format. This is highly illegal and terribly risky, especially as it concerns the IRS. Salon owners that hire independent contractors or 1099 employees or rent booths, are not required to pay that individuals taxes or employment taxes, which in essence is why they do it. What it comes down to is that they are claiming an independent contractor, but treating them as their own employee, all while not paying any of the associated taxes required by law.

This practice totally undermines and diminishes the hard work that stylists do. Most of the stylists out there do not track their earnings correctly. Left to their own accord, most of them will not claim their tips as income or for that matter, report any cash earning as income. What this does is reduces their claimed income to the point that they are unable to acquire decent loans for such things as a new car, a home, credit cards, etc. They do not receive W2’s from an employer and must use their tax returns for such things, which tend to reflect a very weak income as a result of their claimed earnings. As a client, you are not helping a stylist by paying them in cash or providing them with cash tips, knowing they are not going to claim that money as income. What this is doing is perpetuating their continued efforts to circumvent well established laws, thereby undermining their own careers as professional cosmetologists. Few of us need be told the advantage to a person when we compel them to do the right things. More often than not, it helps make them a better person and in this case, it most certainly would.

Continuing education and participation in industry shows and events, is also a challenge for these stylists because their participation in these processes comes out of their own earnings. This means your independent or 1099 stylists likely is not up on the latest trends and safety processes.

The independent stylist has no paid educational opportunities, no paid holidays, no paid vacations, and no paid benefits at all. The big question here is, why do so many stylists choose to be independent contractors or 1099 employees with these circumstances? Honestly, it makes little to no sense considering how the process functions in most known instances. It causes them to be credit challenged, which is a huge problem. They are wide open to personal lawsuits. They have no paid benefits. They risk their own and their family’s well-being by conducting business illegally without proper taxing and licensing, which is a huge risk to place yourself or your family in and lastly it puts you, the client, at a huge disadvantage with little to no protection at all from any errors that may occur. As a client, you would have great difficulty holding a salon owner accountable for errors when an independent contractor actually provided your services.

D’maj Beauty Salon looks out for its clients and for its employees. We provide a safe, sanitary, lawful environment for our clients and for our employees. We employee outside companies to handle our taxes, payroll, and legal matters. Our employees are provided with paid continuing education, paid access to industry events, paid holidays, and paid vacations. We will be providing 401k, medical, and disability benefits as our company grows.

We know at D’maj Beauty Salon that our success and growth relies totally upon the trust and satisfaction of our clients, the continued dedication and enthusiasm of our employees, and the lawful processes we employ. We do have high standards and so working for us is easy, only as long as it’s understood that our policies will be followed and done correctly, in accordance with industry standards, and in accordance with laws. Many stylists in the industry will not be up for this challenge, especially if they have grown comfortable functioning outside of the law, which unfortunately many have.

If you are an independent contractor, 1099 employee, or “booth” renter and this article doesn’t scare you, it should. Sooner or later our laws catch up with us, and we all know this. If you’ve been breaking these laws for a decade, it does not mean they won’t eventually catch up with you and it more likely means they are closer to it than you think. The IRS has stated very clearly that if they catch a stylist conducting business in this manner, they will conduct a thorough audit of that stylist, the owner(s) of the salon, other persons within that salon, and all past employees of that salon. Bear in mind it takes only a single phone call to the IRS from a disgruntled client, yours or another employees, to trigger these events. This information is readily available on the IRS website. What this means is that even working for a salon that isn’t following the laws, can lead you to a seriously unwanted investigation of yourself by the IRS. Your best bet as a law abiding citizen, is to leave that salon the very moment you realize they are not following the laws. You have to protect yourself and your family from such a legal and financial crises.

It’s time to stop fooling around. Clients, you need to protect yourselves, too. Follow the advice all of us have received for decades; make sure your contractor is properly licensed and insured. Stylists, stop wasting your time and working so hard for so little in return. You think that renting a “booth” gives you freedoms that in reality, do not exist. You aren’t earning more money because you are paying for everything out-of-pocket. You are in violation of a number of laws, any one of which can catch up with you at any time. You are taking too many risks and have made yourselves weak and fearful in the process.

This article is intended to enlighten, not accuse anyone in particular. The problems noted are widespread, not localized. It is up to each of us to garner the strength needed to conduct ourselves honorably. It’s not always easy, but we absolutely have to make every attempt to do so. If the industry and local governments will not correctly enforce compliance of its licensees and ensure regulatory compliance respectively, we then are obligated to correctly and honorably regulate ourselves. The best of luck to all of us who try and to our collective successes…

Vince

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