BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 1125         Hearing Date:    April 18,  
          2016
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          |Author:   |Nguyen                                                |
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          |Version:  |March 28, 2016                                        |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Sarah Mason                                           |
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            Subject:  Employment relations:  nail care salons:  labor law  
                                     compliance


          SUMMARY: Requires BBC, for an application for an establishment license,  
          if the establishment will offer nail care services, to include a  
          signed acknowledgement that an applicant understands their  
          responsibility to comply with any applicable state labor laws  
          and comply with the informational materials BBC selects or  
          develops related to basic labor laws.  

          Existing law:
          
          1) Provides for the licensure regulation of the practice of  
             barbering, cosmetology and electrolysis under the Barbering  
             and Cosmetology Act (Act) by the Board of Barbering and  
             Cosmetology (BBC).

          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 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  7316 (c) (2))

          3) Provides for licensure of manicurists by 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 subject to a denial and have either completed  







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             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  7326)

          4) Defines "establishment" as any premises, building or part of  
             a building where any activity licensed under the Act is  
             practiced and sets forth requirements for licensure as an  
             establishment by BBC.  (BPC  7346-7352)

          5) Requires BBC to maintain a program of random and targeted  
             inspections of establishments to ensure compliance with  
             applicable laws relating to the public health and safety and  
             the conduct and operation of establishments.  (BPC  7353)

          6) Establishes the Division of Labor Standards Enforcement  
             (DLSE) and grants the Chief of DLSE (Labor Commissioner) and  
             his or her employees free access to all places of labor.   
             States that any person, or agent or officer thereof, who  
             refuses admission to the Labor Commissioner or deputy or  
             agent or who, upon request, willfully neglects or refuses to  
             furnish them any statistics or information, pertaining to  
             their lawful duties is guilty of a misdemeanor, punishable by  
             a fine of not more than one thousand dollars ($1,000).   
             (Labor (LAB) Code  83 and 90)

          7) States the policy of this state to vigorously enforce minimum  
             labor standards in order to ensure employees are not required  
             or permitted to work under substandard unlawful conditions or  
             for employers that have not secured the payment of  
             compensation, and to protect employers who comply with the  
             law from those who attempt to gain a competitive advantage at  
             the expense of their workers by failing to comply with  
             minimum labor standards.  Requires the Labor Commissioner to  
             adopt an enforcement plan for the field enforcement unit  
             which shall identify priorities for investigations to be  
             undertaken by the unit that ensure the available resources  
             will be concentrated in industries, occupations, and areas in  
             which employees are relatively low paid and unskilled, and  
             those in which there has been a history of violations and  
             those with high rates of noncompliance with the law.  (LAB   
             90.5)

          8) Authorizes the Labor Commissioner, after investigation and  








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             upon determination that wages or monetary benefits are due  
             and unpaid to any worker in the State of California, to  
             collect such wages or benefits on behalf of the worker  
             without assignment of such wages or benefits to the  
             Commissioner.  (LAB  96.7)

          9) Authorizes the Labor Commissioner to investigate employee  
             complaints and provide for a hearing in any action to recover  
             wages, penalties, and other demands for compensation.  (LAB   
             98)

          10)Prohibits an employer or agent from collecting, taking, or  
             receiving any gratuity or a part thereof that is paid, given  
             to, or left for an employee by a patron, or deduct any amount  
             from wages due an employee on account of a gratuity, or  
             require an employee to credit the amount, or any part  
             thereof, of a gratuity against and as a part of the wages due  
             the employee from the employer. Provides that every gratuity  
             is hereby declared to be the sole property of the employee or  
             employees to whom it was paid, given, or left for.  Requires  
             an employer that 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.  Provides that payment of gratuities made by patrons  
             using credit cards shall be made to the employees not later  
             than the next regular payday following the date the patron  
             authorized the credit card payment.  (LAB  351)

          11)Requires, at the time of hiring, an employer to provide each  
             employee a written notice, in the language the employer  
             normally uses to communicate employment-related information  
             to the employee, containing information about the rate or  
             rates of pay.  (LAB  2810.5)

          This bill:

          1) Requires BBC, for an application for an establishment  
             license, if the establishment will offer nail care services,  
             to include a signed acknowledgement that an applicant  
             understands their responsibility to comply with any  
             applicable state labor laws and the informational materials  
             selected or developed by BBC on "basic labor laws".   








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             Specifies that "basic labor laws" includes, but is not  
             limited to:

             a)   Key differences between legal rights, benefits and  
               obligations of an employee and an independent contractor;

             b)   Wage and hour rights for hourly employees;

             c)   Antidiscrimination laws relating to the use of a  
               particular language in the workplace;

             d)   Anti-retaliation laws relating to a worker's right to  
               file complaints with the Department of Industrial Relations  
               (DIR); and

             e)   How to obtain more information about labor law from DIR.

          
          FISCAL  
          EFFECT: Unknown.  This bill is keyed "fiscal" by Legislative  
          Counsel.   

          
          COMMENTS:
          
          1. Purpose.  The  Author  is the Sponsor of this bill.  The  
             Author's district includes the largest number of Vietnamese  
             residents outside of Vietnam.  According to the Author, in  
             just three of the twelve cities in the district, there are  
             approximately 25,000 licensed cosmetologists.  The Author  
             believes that it is important to be mindful of the cultural  
             sensitivity around the communication with nail salon workers  
             whether it be in English or Vietnamese and that sometimes  
             basic labor laws can be overlooked.  The Author believes that  
             having an establishment licensee sign an acknowledgement form  
             will help with the overall understanding of California's  
             labor laws, thus helping to reinforce that all help reinforce  
             that all nail care establishments are on the same page  
             regarding state labor laws. 

          2. Nail Care in California.  Nail care is a specialty branch in  
             the field of cosmetology.  In California, a licensed  
             cosmetologist can practice nail care and BBC also licenses  
             manicurists as a separate license category.  To become a  








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             licensed manicurist, an applicant must submit proof of  
             completion to BBC of 400 training hours training covering all  
             practices of a manicurist, according to the following:

                       300 hours of technical instruction and practical  
                  training in nail care - 60 hours of technical  
                  instruction in manicures and pedicures (water and oil  
                  manicures including hand and arm massage, complete  
                  pedicure including foot and ankle massage, application  
                  of artificial nails including liquid, gel, and powder  
                  brush-ons, nail tips, nail wraps and repairs, and nail  
                  analysis); 60 hours of practical operations in manicures  
                  and pedicures and 180 hours of nails 

                       100 hours of technical instruction and practical  
                  training in health and safety - 10 hours on laws and  
                  regulations including the Act and BBC Rules and  
                  Regulations; 25 hours on chemistry pertaining to the  
                  practices of a manicurist including the chemical  
                  composition and purpose of nail care preparations,  
                  health and safety/hazardous substances, including  
                  training in chemicals and health in establishments,  
                  material safety data sheets, protection from hazardous  
                  chemicals and preventing chemical injuries, health and  
                  safety laws and agencies, ergonomics, and communicable  
                  diseases, including HIV/AIDS and Hepatitis B; 20 hours  
                  on disinfection and sanitation procedures to protect the  
                  health and safety of the consumer as well as the  
                  technician which entail disinfecting instruments and  
                  equipment as specified with special attention given to  
                  pedicure foot spa and basin disinfection procedures and;  
                  10 hours in bacteriology, anatomy and physiology 

             BBC also recommends in its regulations that schools provide  
             training in communication skills that includes professional  
             ethics, salesmanship, decorum, record-keeping, client service  
             record cards, basic tax responsibilities related to  
             independent contractors, booth renters, employees, and  
             employers

             BBC currently licenses 126,872 manicurists, 310,041  
             cosmetologists (who can also perform nail care services) and  
             52,785 establishments.  BBC does not include information in  
             its establishment license data to differentiate between an  








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             establishment offering nail care services specifically or  
             those offering other personal beautification services. 

          3.Concerns About Nail Salons and Experiences of Nail Salon  
            Employees.  Nail salons have been the focus of studies and  
            media reports in recent years stemming from health, safety and  
            labor concerns in these settings.  In May 2015, the New York  
            Times (NYT) published two articles stemming from interviews  
            with more than 150 nail salon workers and owners that found  
            that a cast majority of workers are paid below minimum wage  
            and are sometimes not even paid.  The articles found that  
            workers "endure all manner of humiliation, including having  
            their tips docked as punishment for minor transgressions,  
            constant video monitoring by owners, even physical abuse."   
            The NYT also found that employers are rarely punished for  
            labor and other violations and that in 2014, when the New York  
            State Labor Department conducted its first nail salon sweep,  
            investigators inspected 29 salons and found 116 wage  
            violations.  While only about a quarter of the more than 100  
            workers said they were paid an amount equivalent to that  
            state's minimum hourly wage, all but three said they had wages  
            withheld in ways considered illegal, such as never getting  
            overtime and many were unaware that working unpaid was against  
            the law and their alarmingly low wages are also illegal.  
            
            A February 2016 follow up report in the NYT articles found  
            that 40 percent of the salons inspected, as part of the Labor  
            Department's increased efforts to inspect following the  
            original May articles, underpaid employees, including one  
            worker at a Manhattan salon who was paid $30 a day for 10-hour  
            shifts, a manicurist in Queens who was paid only $200 for a  
            50-hour workweek, manicurists at seven salons who were forced  
            to work for no pay or had to pay salon owners a fee,  
            ostensibly to learn the trade and several owners admitted to  
            submitting fake payroll records in an effort to fool  
            investigators.  The article highlighted that employers are  
            often unfamiliar with the intricacies of state labor laws. 

          4.Wages and Tips.  In 2008, the Ford Foundation sponsored a  
            survey of 4,387 workers in low-wage industries in the three  
            largest U.S. cities: Chicago, Los Angeles and New York City.   
            The report of that survey, titled Broken Laws, Unprotected  
            Workers: Violations of Employment and Labor Laws in America's  
            Cities, revealed that 26 percent of workers in the sample were  








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            paid less than the legally required minimum wage the prior  
            work week, and 60 percent of these workers were underpaid by  
            more than $1 per hour.  In addition, 76 percent of the  
            respondents who worked overtime in the previous week were not  
            paid the legally required overtime rate by their employers.

            The study also notes that minimum wage violation rates vary  
            significantly by industry, and occupation.  For example, some  
            industries, such as apparel and textile manufacturing and  
            personal and repair services have minimum wage violation rates  
            that exceed 40 percent, while others, including restaurants,  
            and retail and grocery stores, have rates of 20 to 25 percent.  
             However, the study found that undocumented immigrant women  
            were at the greatest risk of minimum wage violations.  The  
            study estimated that the workers in low-wage industries  
            Chicago, Los Angeles, and New York City lose more than $56.4  
            million per week due to labor law violations.

            A follow-up study by the UCLA Institute for Research and Labor  
            and Employment was published in 2015, and that study utilized  
            the data from the 2008 survey, but focused specifically on Los  
            Angeles County.  This study, titled Wage Theft and Workplace  
            Violations in Los Angeles: The Failure of Employment and Labor  
            Law for Low-Wage Workers focused on a survey results of 1,815  
            workers in Los Angeles County.  

            This study found similar results to the national survey:  
            almost 30 percent of the workers sampled were paid less than  
            the minimum wage in the prior work week, and 63.3 percent of  
            these workers were underpaid by more than $1 per hour.   
            Assuming a full-year work schedule, Los Angeles County survey  
            respondents lost an average of $2,070.00 annually out of total  
            earnings of $16,536.00.  The study estimated that workers in  
            low-wage industries in Los Angeles County lose more than $26.2  
            million per week as a result of employment and labor law  
            violations.

            Both of the studies make the same public policy  
            recommendations to address these issues, which included  
            strengthening government enforcement of existing employment  
            and labor laws and stiffening the penalties.

            The low rate of collections of wages has also been evaluated.   
            According to a 2013 report published by the National  








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            Employment Law Project (NELP) and the UCLA Labor Center, only  
            17 percent of workers who prevailed in their wage claims  
            before the DLSE and won a judgment were able to receive any  
            payment between 2008 and 2011.  Of those who did receive  
            payment between 2008 and 2011, workers were able to collect 15  
            percent of what was owed.  In short, the vast majority of wage  
            theft victims received nothing, and those that received  
            anything received little of what they were legally due.

            Tips withheld by nail salon employers was highlighted in the  
            New York Times series.  According to the Internal Revenue  
            Service, tips are discretionary (optional or extra) payments  
            determined by a customer that employees receive from  
            customers.  Tips include cash tips received directly from  
            customers, tips from customers who leave a tip through  
            electronic settlement or payment (including a credit card,  
            debit card, gift card, or any other electronic payment  
            method), the value of any noncash tips, such as tickets, or  
            other items of value and tip amounts received from other  
            employees paid out through tip pools or tip splitting, or  
            other formal or informal tip sharing arrangement.  All cash  
            and non-cash tips an employee receives are income and are  
            subject to Federal income taxes. All cash tips received by an  
            employee in any calendar month are subject to social security  
            and Medicare taxes and must be reported to the employer,  
            unless the tips received by the employee during a single  
            calendar month while working for the employer total less than  
            $20. Cash tips include tips received from customers, charged  
            tips (e.g., 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.  
            
            According to the United States Department of Labor (USDL),  
            tipped employees are those who customarily and regularly  
            receive more than $30 per month in tips. Tips are the property  
            of the employee. The employer is prohibited from using an  
            employee's tips for any reason other than as a credit against  
            its minimum wage obligation to the employee ("tip credit") or  
            in furtherance of a valid tip pool.  Employers electing to use  
            the tip credit provision must be able to show that tipped  
            employees receive at least the minimum wage when direct (or  
            cash) wages and the tip credit amount are combined.  If an  
            employee's tips combined with the employer's direct (or cash)  
            wages of at least $2.13 per hour do not equal the minimum  








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            hourly wage of $7.25 per hour, the employer must make up the  
            difference.  USDL notes that a tip is the sole property of the  
            tipped employee regardless of whether the employer takes a tip  
            credit and that the Fair Labor Standards Act (FLSA) prohibits  
            any arrangement between the employer and the tipped employee  
            whereby any part of the tip received becomes the property of  
            the employer.  For example, even where a tipped employee  
            receives at least $7.25 per hour in wages directly from the  
            employer, the employee may not be required to turn over his or  
            her tips to the employer.

            USDL advises that 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 3 percent on all sales charged to its  
            credit service, the employer may pay the tipped employee 97  
            percent of the tips without violating the FLSA.  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.

          5.Related Legislation This Year.   AB 1978  (Gonzalez) requires  
            Chief of the Division of Labor Standards Enforcement (Labor  
            Commissioner), to include information on the status of wage  
            claims and retaliation complaints, including the average  
            amount of time it takes for a wage claim to receive a  
            preliminary hearing and the current backlog of claims and  
            complaints in the annual report to the Legislature concerning  
            the effectiveness of the field enforcement unit.  (  Status:    
            This bill is pending in the Assembly Committee on Labor and  
            Employment.)
            
             AB 2025  (Gonzalez) requires BBC to make available and offer  
            all written materials provided to licensees and applicants in  
            English, Spanish, and Vietnamese.  The bill also requires BBC  
            to include labor laws that pertain to the types of licensees  
            who may work in establishments as a required subject of  
            instruction.  Additionally, the bill adds requirements to  
            licensure as an establishment, including knowledge of basic  
            labor laws that pertain to the types of licensees who may work  
            in the establishment (such as the differences between the  








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            legal rights, benefits, and obligations of an employee and an  
            independent contractor, wage and hour rights for hourly  
            employees, antidiscrimination laws relating to the use of a  
            particular language in the workplace, anti-retaliation laws  
            relating to a worker's right to file complaints with the  
            Department of Industrial Relations and how to obtain more  
            information about labor law from the Department of Industrial  
            Relations) and requires BBC to develop and add questions on  
                                                                                       basic labor laws to the application, select or create  
            informational materials on basic labor laws in consultation  
            with stakeholders and require establishment applicants to sign  
            an acknowledgement that they understand that establishments  
            are responsible for obeying state labor laws and they  
            understand the BBC's basic labor law materials.  (  Status:   The  
            bill is pending in the Assembly Committee on Business and  
            Professions.) 
             
            AB 2125  (Chiu) requires the Department of Public Health (DPH)  
            to publish guidelines, including one or more model ordinances,  
            for cities, counties, and city and counties to voluntarily  
            implement local healthy nail salon recognition programs with  
            specified criteria for nail salons, including the use of less  
            toxic nail polishes and polish removers and improved  
            ventilation.  (  Status:   The bill is pending in the Assembly  
            Committee on Environmental Safety and Toxic Materials.) 
             
            AB 2437  (Ting) requires a nail care services establishment  
            licensed by BBC to register with the Division of Labor  
            Standards Enforcement within the Department of Industrial  
            Relations and receive specified training regarding workplace  
            rights and wage and hour laws including overtime compensation  
            and requires the establishment to arrange for the training to  
            be provided to its employees.  The bill also requires BBC to  
            deny the renewal of an establishment license to an  
            establishment that provides nail care services if a final  
            judgment has been made against the employer for failing to pay  
            wages.  (  Status:   The bill is pending in the Assembly  
            Committee on Business and Professions.)  
          
          6.Prior Related Legislation.   SB 549  (Correa) would have  
            authorized BBC to collect gender, language and ethnicity data  
            from new licensure applicants and renewal licenses and posted  
            certain information on the BBC's website.  (  Status:   The bill  
            was vetoed by Governor Schwarzenegger who wrote that "The  








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            stated intent of this bill is based on the belief that the  
            collection of statistics on the gender, ethnicity, and  
            language preference of the Board of Barbering and Cosmetology  
            (Board) licensees will lead to improved working conditions.  
            Since that connection is specious at best, I do not believe  
            this is an area that requires micromanagement of the Board".)   
             
            
             AB 2689  (Tran) of 2008 would have established the Vietnamese  
            Nail Worker Information Act which would require manufacturers  
            and certain other persons that sell or use professional  
            use-only nail care products to prepare, translate and provide  
            material safety data sheets (MSDS) in the Vietnamese language  
            to purchasers of the products as well as licensed professional  
            nail care employees upon request.  (  Status:   The bill was held  
            under submission in the Assembly Committee on Appropriations.)
           
           7.BBC Is Not Able To Differentiate Between Establishment Types.   
            This bill applies specifically to establishments that offer  
            nail care services, however BBC does not currently classify  
            licensed establishments based on the types of services they  
            offer.  BBC does not, for example, ask an applicant for an  
            establishment license to list the type of establishment or  
            whether the establishment will offer nail care services.  If  
            the Author intends for nail salons to be the only type of BBC  
            licensed establishment where the applicant is required to  
            acknowledge understanding of and responsibility to comply with  
            state labor laws, the Author may wish to require BBC to  
            collect establishment data about type of services provided, to  
            then ensure that the provisions of the bill apply to  
            applications for nail care services establishments.   

          
          SUPPORT AND OPPOSITION:
          
           Support:   None on file as of April 12, 2016.

           Opposition:  None on file as of April 12, 2016.


                                      -- END --
          










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