BILL ANALYSIS Ó
SB 896
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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