BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:   June 21, 2016


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                  Rudy Salas, Chair


                      SB 896(Nguyen) - As Amended May 23, 2016


          SENATE VOTE:  27-4


          SUBJECT:  Barbering and cosmetology:  nail care establishments:   
          credit and debit cards


          SUMMARY:  Requires an establishment that offers nail care  
          services to accept a debit or credit card payment for a tip or  
          gratuity, if the establishment accepts a debit or credit card  
          for payment of nail care services, as specified.   


          EXISTING LAW:   


          1)Establishes the Barbering and Cosmetology Act (Act) and the  
            Board of Barbering and Cosmetology (BBC) to license, regulate,  
            and discipline professional work in hair, skin, nail care, and  
            electrolysis; and, ensure the protection of the public is  
            paramount when other interests are sought to be promoted.   
            (Business and Professions Code (BPC) Section 7301, et seq.)


          2)Establishes nail care as a specialty branch in the practice of  
            cosmetology and defines nail care as the practice of cutting,  
            trimming, polishing, coloring, tinting, cleansing, manicuring,  








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            or pedicuring the nails of any person or massaging or  
            beautifying from the elbow to the fingertips or the knee to  
            the toes of any person.  (BPC Section 7316(c)(2))
          3)Provides for licensure of manicurists by the BBC to practice  
            nail care and requires applicants to be over the age of 17,  
            complete 10th grade in public California school or equivalent,  
            not be subject to a denial and have either completed a course  
            in nail care from a BBC approved school, or practiced nail  
            care in another state for a period of time equivalent to the  
            study and training of a BBC approved course or completed an  
            apprenticeship program in nail care.  (BPC Section 7326)


          4)States that every gratuity is the sole property of the  
            employee or employees to whom it was paid, given, or left for.  
             (Labor Code (LC) Section 351)


          5)Requires an employer who permits patrons to pay gratuities by  
            credit card to pay the employees the full amount of the  
            gratuity that the patron indicated on the credit card slip,  
            without any deductions for any credit card payment processing  
            fees or costs that may be charged to the employer by the  
            credit card company, and requires payment of gratuities by  
            credit card to be made to the employees no later than the next  
            regular payday following the date the patron authorized the  
            credit card payment.  (LC Code Section 351)


          THIS BILL: 


          1)Requires an establishment offering nail care services that  
            accepts a debit or credit card as payment for nail care  
            services to also accept a debit or credit card for payment of  
            a tip, consistent with specified provisions in the LC.


          FISCAL EFFECT:  According to the Senate Appropriations  








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          Committee, pursuant to Senate Rule 28.8, this bill will result  
          in negligible state costs. 


          COMMENTS:  


          Purpose.  This bill will require nail care establishments, which  
          are licensed by the BBC, to accept credit or debit cards for  
          purposes of leaving a tip, if they allow credit or debit cards  
          for the payment of services.  This bill is sponsored by the  
          author.  According to the author, "Currently, nail salons in the  
          state accept various forms of payment for services provided and  
          any tip left for the technician.  Some salons only accept cash.   
          Most establishments allow clients to use a debit or credit card  
          for the cost of the service and to leave their technician a tip.  
           A small number of establishments accept paying for a service  
          with a credit or debit card, but do not allow a tip to be  
          charged.  Requiring salons that allow clients to use credit or  
          debit cards to also leave a tip on a credit card or debit card  
          will not only be more convenient for the client but it will also  
          ensure that technicians are appropriately compensated for their  
          labor."  


          Background.  Nail Care.  In California, a licensed cosmetologist  
          can practice nail care and the BBC also licenses manicurists as  
          a separate licensure category.  To become a licensed manicurist,  
          an applicant must submit to the BBC proof of completion of 400  
          hours of technical instruction and practical training as  
          specified in Title 16 Section 950.4 of the California Code of  
          Regulations.  Additionally, the BBC recommends that schools  
          provide training in the area of communication skills including  
          professional ethics, salesmanship, decorum, record-keeping,  
          client service record cards, basic tax responsibilities related  
          to independent contractors, booth renters, employees, and  
          employers.










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          Licensed Establishments.  The BBC licenses and regulates over  
          550,000 licensees, including over 50,000 establishments.  The  
          types of establishments that the BBC regulates, include, but are  
          not limited to, nail salons, barbers, and hair salons.  The BBC  
          is required to maintain a program of random and targeted  
          inspections of establishments to ensure compliance with  
          applicable laws relating to health and safety.  Currently, the  
          BBC does not differentiate between the types of establishments  
          it licenses, and business models may vary.  


          The BBC currently licenses over 126,000 manicurists, 310,000  
          cosmetologists (who can also perform nail care services) and  
          50,000 establishments.  BBC does not include information in its  
          establishment license data to differentiate between an  
          establishment offering nail care services specifically and those  
          offering other personal beautification services. 


          An establishment licensee may operate a business to conduct any  
          of the professional services for which a license is required  
          under the Act.  Establishment owners (establishment licensees)  
          do not need to hold a separate professional license in order to  
          own and operate an establishment; however, BPC Section 7348  
          specifies that an establishment must at all times be in the  
          charge of a licensed person.  


          Under current law, there is no requirement for licensed  
          establishments to accept a certain form of payment for  
          professional services.  Establishment owners or individual  
          licensees may choose to accept any form of payment for  
          professional services including, but not limited to prohibiting  
          checks, but accepting credit cards, or requiring cash-only  
          transactions.  While the BBC inspects establishments for  
          compliance with applicable health and safety requirements, it  
          does not inspect businesses for labor related issues, including  
          how the payment for services is made.  This bill would require  
          nail care establishments, which accept a credit card or debit  








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          card as a form of payment, to also allow tips to be added to the  
          debit or credit card.  This bill does not require a nail care  
          establishment to accept a credit card or debit card as a form of  
          payment.  The author contends that with so many establishments  
          statewide, it would make sense to have a uniform payment system.  
           As currently drafted, this bill would apply only to nail  
          establishments.  


          Tipping.  According to information provided on the website of  
          the Internal Revenue Service (IRS), tips are discretionary  
          (optional or extra) payments determined by a customer that  
          employees receive from customers.  Tips can be presented in the  
          form of cash, electronic formats (credit, debit, gift cards or  
          other electronic means), or as noncash items such as tickets.   
          "Employees must report to their employer all cash tips received  
          except for the tips from any month that total less than $20.  
          Cash tips include tips received from customers, charged tips  
          (for example, credit and debit card charges) distributed to the  
          employee by his or her employer, and tips received from other  
          employees under any tip-sharing arrangement."


          Credit and Debit Cards.  California businesses are not required  
          to accept a credit card or debit card as a form of payment for  
          services.  Civil Code Section 1725(a) lists the specific  
          requirements for businesses if they choose to accept credit  
          cards, which include, but are not limited to, prohibiting the  
          recording of a credit card number or contacting a credit card  
          issuer to determine if the credit amount available will cover  
          the amount of the purchase.  Under current California law, LC  
          Section 351 specifically prohibits an employer from collecting,  
          taking, or requiring an employee to credit the amount of  
          gratuity as part of the employee's wages.  Additionally, LC  
          Section 351specifies that if an employer permits gratuity to be  
          paid though a credit card, the employer may not deduct any  
          payment processing fees or costs that may be charged to the  
          employer by the credit card company.  Under this bill, nail  
          establishment owners would need to comply with the provisions of  








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          LC Section 351 and would not be permitted to deduct processing  
          fees related to the payment of gratuity.  Regardless of the form  
          of payment, tips or gratuity belong solely to the employee, not  
          the employer, and the provisions of this bill do not alter this  
          existing structure in California.  

          At the federal level, according to information retrieved from a  
          United States Department of Labor, Wage and Hour Division, fact  
          sheet, "Where tips are charged on a credit card and the employer  
          must pay the credit card company a percentage on each sale, the  
          employer may pay the employee the tip, less that percentage.   
          For example, where a credit card company charges an employer  
          three percent on all sales charged to its credit service, the  
          employer may pay the tipped employee 97 percent of the tips  
          without violating the Fair Labor Standards Act. However, this  
          charge on the tip may not reduce the employee's wage below the  
          required minimum wage. The amount due the employee must be paid  
          no later than the regular pay day and may not be held while the  
          employer is awaiting reimbursement from the credit card  
          company."  

          Nail Establishment Concerns.  Labor concerns for nail  
          technicians were raised in a May 7, 2015, article from the New  
          York Times, "The Price of Nice Nails," in which it was reported:  
          "The New York Times interviewed more than 150 nail salon workers  
          and owners, in four languages, and found that a vast majority of  
          workers are paid below minimum wage; sometimes they are not even  
          paid.  Workers endure all manner of humiliation, including  
          having their tips docked as punishment for minor transgressions,  
          constant video monitoring by owners, even physical abuse.   
          Employers are rarely punished for labor and other  
          violations?Tips or wages are often skimmed or never delivered,  
          or deducted as punishment for things like spilled bottles of  
          polish."


          In August of 2015, the Assembly Select Committees on Women in  
          the Workplace, and Girls and Women of Color held a joint hearing  
          with the Assembly Committees on Health, Business and  








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          Professions, and Labor and Employment, which focused on both the  
          health and safety of licensees regarding exposure to chemicals  
          and other ingredients, and concerns about labor practices in  
          nail salons.  The purpose of that hearing was for state  
          agencies, advocates, and industry to obtain and share  
          information, address concerns, and discuss policy  
          recommendations regarding nail salon practices.  As part of that  
          discussion, the issue of tips was raised.  

          ARGUMENTS IN SUPPORT: 


          None on file.


          ARGUMENTS IN OPPOSITION:


          The  Professional Beauty Federation of California  writes in  
          opposition, "While we support the intent to encourage tips to be  
          given to our wonderful licensees, we cannot support the level of  
          statutory micromanagement of salon business operations called  
          for under [this bill].  Salon owners pay on average 3% fees to  
          credit card companies for the benefit of allowing their  
          clientele to use such payment methods, and those charges apply  
          to tips.  While rare, some salons choose to forgo having to pay  
          that fee for tips (and instead encourage cash tips), and we  
          believe that should be their prerogative."


          POLICY ISSUE(S):


          Types of Establishments. As currently drafted, this bill is only  
          applicable to nail care establishments; however, the BBC does  
          not issue an establishment license based on the type of services  
          each establishment offers.  An establishment license would  
          permit the establishment licensee to offer any of the  
          professional services for which a license is required under BPC  








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          Sections 7301, et seq.  For example, a licensed establishment  
          may provide hair care (cosmetologist), skin care (esthetician),  
          and nail care (manicurist) under one license.  It is unclear if  
          the author's intent is to make this bill applicable to all  
          establishments that provide a broad range of services including  
          nail care services or just to those establishments that provide  
          only nail services.  


          Ensuring Employees Receive the Proper Tips.  The issue of proper  
          tip collection was raised during the previous 2015 joint  
          informational hearing.  Part of that discussion called into  
          question the practice of employers not properly distributing  
          tips to their employees, and employees potentially being unaware  
          of the tips they have received.  Although, current California  
          law (LC Section 351) specifies that tips are the sole property  
          of the employee for which the tip was made, this bill does not  
          address if tips are properly distributed to the appropriate  
          employee for which the tip was provided. 


          Compliance.  As currently drafted, it is unclear how the  
          provisions of this bill would be enforced.  The author may wish  
          to clarify what, if any, role the BBC would play in ensuring  
          compliance with the provisions of this bill. 


          REGISTERED SUPPORT:


          None on file.


          REGISTERED OPPOSITION:


          Professional Beauty Federation of California
          Board of Barbering and Cosmetology









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          Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301