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Being Inspected

Shaw said she could not comment on the inspections, but she did say spas have problems with labor law compliance. "We get a lot of complaints about them, actually," she says. "Hair salons are pretty good. They understand that [independent contractors] have to make their own appointments and collect the money. But some of the spa owners … they want more control."

There is no single definition of who qualifies as an independent contractor. Instead, the determination is made on a case-by-case basis. For federal taxes, the Internal Revenue Service applies a 20-part test, looking at factors that help establish whether the independent contractor or the business owner has control over the work. The California labor standards enforcement division looks at those 20 factors, as do labor officials in many states. Some states define who is an independent contractor in statute.

Dean Fryer, a spokesman for the California Division of Labor Standards Enforcement, says that for a massage therapist in a spa to qualify as an independent contractor, the spa owner would have to have very little input into how they did the work. "The individual coming in is providing their own tools, setting their own schedule and bringing their own clientele," he explains. Independent contractors must also pay their own business taxes.

Fryer's agency conducts workshops for employers, but because the law is complicated, he believes that most business owners should be in touch with either an employment attorney or an industry association. If a massage therapist is deemed to be an employee and the employer has no workers' compensation insurance, the agency issues a $1,000 fine. "The requirement is for the protection of workers," Fryer explains. "If they get injured on the job, they can have medical coverage. It's a no-fault system."

Other California fines include $250 for each paycheck for which there is not a pay stub itemizing deductions. The statute of limitations for the fines goes back three years, he says, and the employer bears the burden of keeping accurate time records.

Workers who were misclassified may also be able to make a separate minimum wage claim. Although Shaw could not answer questions about the sweep, Fryer describes the way inspections should be conducted. "When we come in, first we identify ourselves," he says. "Normally we have two to three people. We introduce everyone and we provide business cards. We'll say, ‘We want to see your payroll records, your workers' compensation records, and this other person is going to talk to your employees.'"

Fryer believes inspectors should try to inspire cooperation from business owners. "We don't carry handcuffs," he explains. "We don't even carry guns. There have been times when we've been confronted with very hostile business owners. If that happens, we back away and come back with law enforcement."

Once admitted to the business, inspectors set up separate interviews with workers. "We ask what they're being paid, how often they get paid and when they get their meal breaks," Fryer says. With a cooperative owner, an inspection could be over in 45 minutes, he says. If records are missing, the process could take two hours.

The incentive to cooperate is that inspectors can sometimes work with business owners, even when they're in violation. "When there's a violation, there's a violation," Fryer says. "But we don't have to take it to the full three years of the statute of limitations."

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