BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     SB 896

                                                                    Page  1


          896 (Nguyen)

          As Amended  June 30, 2016

          Majority vote

          SENATE VOTE:  27-4

          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |Business &      |13-1 |Salas, Brough, Baker, |Gatto               |
          |Professions     |     |Bloom, Campos,        |                    |
          |                |     |Chávez, Dodd, Eggman, |                    |
          |                |     |Gomez, Holden,        |                    |
          |                |     |Mullin, Ting, Wood    |                    |
          |                |     |                      |                    |
          |Appropriations  |14-0 |Gonzalez, Bloom,      |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |Roger Hernández,      |                    |
          |                |     |Holden, Quirk,        |                    |
          |                |     |Santiago, Wagner,     |                    |
          |                |     |Weber, Wood           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |


                                                                     SB 896

                                                                    Page  2

          SUMMARY:  Requires an establishment offering 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.  Specifically, this bill  
          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 Labor Code (LC).
          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, negligible state fiscal impact. 


          Purpose.  This bill will require nail care establishments, which  
          are licensed by the Board of Barbering and Cosmetology (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  


                                                                     SB 896

                                                                    Page  3

          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  

          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, Business and  
          Professions Code Section (BPC) 7348 specifies that an  
          establishment must at all times be in the charge of a licensed  


                                                                     SB 896

                                                                    Page  4

          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  
          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  

          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  


                                                                     SB 896

                                                                    Page  5

          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  
          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.  

          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  
          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  


                                                                     SB 896

                                                                    Page  6

          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.  

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