CA Salon Fined $1.2M for Failure to Carry Work Comp Coverage, Misclassification of Workers

Temecula, CA (WorkersCompensation.com) – A California nail salon is facing more than $1 million in fines for failing to carry workers’ compensation coverage for three years, and for misclassifying more than 30 workers, a state agency said.

Young’s Nail and Spa was cited for numerous labor violations following a 40-month investigation into the business by the California Department of Industrial Relations.

Investigators found that not only did the company not carry workers’ compensation for three years, but that it didn’t properly pay 36 workers who worked 9.5 to 10-hour shifts per day.

According to investigators, the workers were classified as contractors and were paid per-services they performed at the salon. Consequently, the workers were not paid for the hours they worked, or for the overtime they worked and were not provided with required meal and rest breaks.

The business was cited with $1.2 million in fines, including civil penalties and back pay due to the workers.

Civil penalties included: 

• $207,887 for failure to maintain workers’ compensation coverage
• $260,000 for worker misclassification
• $104,000 for failure to provide proper wage statements
• $100,300 for wage violation penalties

The company will also be required to pay the workers more than $670,000 in wages, interest on those wages, damages and penalties.

California Labor Commissioner Julie Su said the salon operators attempt to circumvent labor laws by classifying employees as “independent contractors,” meant the company would now owe more than they would have had to pay the workers as employees.

“Using misclassification as a business model not only denies workers of their rightful pay, but also gives the employer an unfair advantage over law-abiding businesses,” Su said in a statement. “California law is clear that if employers pay less than the minimum wage, when they are caught, they will be responsible for paying not just the wages owed, but an equivalent amount in liquidated damages plus interest.”

California law requires that workers who are paid less than minimum wage are entitled to “liquidated damages,” or the amount of the underpaid wages plus interest. Employers must also provide a worker with their final wages within 72 hours, or face penalties equivalent to the employee’s daily rate of pay multiplied by the number of days an employee is not paid, up to a maximum of 30 days. 

WorkersCompensation.com calls to the California Department of Industrial Relations’ spokesperson and to the Professional Beauty Association's Nail Manufacturers Council for comment were not immediately returned by press time.

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