SACRAMENTO (CBS13) — Some small businesses are scrambling to figure out how to stay afloat after a high court ruling.

A recent California Supreme Court decision is changing the way independent contractors are classified, and it’s already having a big impact on local shops. Many fear it will hurt millions of workers and affect businesses’ bottom lines.

RELATED: Court Ruling Has Independent Contractors Looking For Answers

The work doesn’t stop at downtown Sacramento’s Bottle and Barlow, even if it became a one-man shop.

“I lost my entire staff,” said owner Anthony Giannotti.

He says all seven of his barbers quit after a state supreme court ruling that will change their way of work.

“It doesn’t just affect my business, it affects every independent contractor in the state of California,” said Giannotti.

RELATED: How A California Supreme Court Ruling Changed Independent Contractors

Historically, the cosmetology industry, which includes barbers and hair stylists, have been classified as independent contractors, but that won’t be the case anymore.

Giannotti explains the new rule: “You cannot classify someone as an independent contractor if they offer the same service that is the primary business of the business.”

WHAT IS AN INDEPENDENT CONTRACTOR?

The April 2018 court ruling now says workers are assumed to be employees unless all three of these factors can be proven:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

So, basically, a barber can no longer work in a barbershop as an independent contractor where they typically set their own hours and pay.  Instead, they’ll now have to become employees of the business on an official payroll.

“Which is insane for a small business, like this. We can’t afford to have a bunch of employees.  What are you going to pay them you know, minimum wage?” said Victory Ink Tattoo owner Ristina Rodriguez.

RAW: Extended Interview With Anthony Giannotti

Rodriguez and her husband have owned their West Sacramento tattoo shop for eight years. Theirs is an industry full of independent contractors. She worries the new rules will put shops out of business.

“I think they will disappear. It’s not going to be sustainable for them anymore,” she said.

“This goes as far as your FedEx drivers are independent contractors, yoga instructors, pilates instructors.  This is going to have a huge effect on the fifth-largest economy in the world,” said Giannotti.

He plans to hold a seminar on Sept. 16 that will be open to all independent contractors. Attorneys and employment experts will be on hand to answer any questions.

EDITOR’S NOTE: The headline of this story has been corrected to reflect that the independent contractors who quit are workers.

Comments (41)
  1. Mike Gartman says:

    each contractor could incorporate, file an election to be an S-Corporation, then the corporation could sign a services contract with the barber who owns the shop. It’s a pain in the ass, but should work. But I am a CPA from Virginia, and I know California is like a foreign country, so it may not work there.

  2. jsolbakken says:

    If the law is so written, then we cannot blame the justices. But I bet dollars to donuts that the law does not require this ruling. I bet that this is the court acting like the psychotic liberal megalomaniacs that we know they are, and their deliberate intent is to collect more employment tax and also turn many independent contractors in to serfs.

    1. Steve Mock says:

      Exactly, it’s all about collecting more taxes. Washington did the same to all of the youth sports leagues, declaring all coaches to be employees and therefore subject to all employment taxes. That jacked up the fees to play, costing families more, with the money going straight to the government.

    2. Jason Scharton says:

      The state would probably make less in taxes if they were employees. It’s not like contractors don’t pay taxes. We actually pay more vs a W2 employee unless you have a lot of write offs. If barbers were W2, they would be paid a much lower wage per hour, and hopefully get some tips that they have to still claim either way. Overall their income would be lower than a contractor, so less taxes would be paid.

  3. jsolbakken says:

    I just figured out the solution. Change the name of your business from barbering to carpet cleaning service and then you can hire all the barbers and cosmetologists you want. And all the
    carpet cleaners can work for the barber shoppes.

  4. Margaret Bobo says:

    IF THEY RENT THE SPACE IN WHICH THEY PREFORM THEIR WORK THIS DOES NOT APPLY BECAUSE THEY ARE NOT HIRED BY THE PLACE THEY RENT THE SPACE FROM

    1. jsolbakken says:

      “F THEY RENT THE SPACE IN WHICH THEY PREFORM THEIR WORK THIS DOES NOT APPLY BECAUSE THEY ARE NOT HIRED BY THE PLACE THEY RENT THE SPACE FROM”

      Sure, makes sense, but this tells us that the problem is forcing the barbers and everyone else to become expert in the minutiae of law that should not exist in the first place. This is all about taxing and controlling people, not maintaining a just and orderly society. This sort of law is pure evil, that’s all there is to it.

  5. Larry Candela says:

    The problem is that many companies have bypassed labor laws by overusing and abusing the use of independent contractors among their workforces. So, you have instances where employees work for years and years for a company, but regarded as an “independent contractor”. So, the company doesn’t have to compensate them for benefits, as it does its regular employees. Except, that in fact, they ARE regular employees.

    Look, if you are going to use contract employees, then treat them as such. Don’t fill your staffing with fake “contract”employees just so you can weasel out of paying them appropriately.

    The judge made the right call here.

    1. jsolbakken says:

      “The judge made the right call here.”
      No, the judge made too broad a ruling. Not everyone fits in to your narrow definition of employment. The prior regime of 20 factors to considered worked well enough, all they had to do was apply it consistently.
      The real problem here is that the judiciary should not be legislating. Judges are not legislators. Judges need to apply the law, not make it, and not rewrite it to suit their own peculiar idiosyncratic fantasies of what is fair. Seems like you do not understand the difference between an Executive, a Legislative, and a Judiciary function.

  6. David Kramer says:

    Work part time.

  7. Leigh Pedigo Siegfried says:

    Pay commission per job. If they rent their both, find a way for it to equal the pay out with commission. Would that help? IDK

  8. Jezz At Saks says:

    he says he lost his entire staff but he didn’t take the responsibility to actually employ any of them.

  9. I wonder of the barbershop owner voted for Jerry Brown who appointed three of the liberal justices who made this ruling and decided to take it onto themselves to rewrite CA employment law instead of leaving it to the legislature.

  10. Edward Anderson says:

    Well THAT’S a fine kettle of Uber Drivers!

  11. kathyalong says:

    Hold on. I want to know why the barbers quit. According to this, it just sounds like they took interpreting the law into their own hands. If you read about the original case, that had to do with drivers who were working as contractors full time for their “employer” driving his trucks. They definitely should be employees. This is different, very different. Barbers rent space. They run their own business in MOST cases. Maybe this barbershop was different. Maybe the owner required the same thing of his barbers as he would employees and maybe the barbers didn’t like it so quit because they weren’t getting contractor benefits (more pay, flexibility, independence). Or did the tax board come knocking on their doors and threaten them with penalties? If so, why aren’t we hearing about more barbers and hair stylists quitting. I don’t know. I think this is not the whole story. We need a CPA and maybe a tax attorney to weigh in on this.

  12. Randy Rasmussen says:

    Keep voting for moronic Democrats ( the rule, not the exception ) and this stupidity will continue.

  13. Tim McCrory says:

    The federal and state income taxes are frauds. Learn the truth. Free ebook. http://www.nontaxpayer.net

  14. Ed Brown says:

    go liberals you will get your wish to destroy this country!!!!!

  15. Register as a Comic Book/magazine store or Library, have 1 for sale at the counter and books and magazines for short term release. I wonder if that will work

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