Commission stylists, '1099' stylists and booth renters: am I underpaying or misclassifying?

Greymill AcademyUS6 min readReviewed Oct 202613 primary sourcesUK version

The short answer

A booth renter must really run their own business, and every commission employee needs a minimum wage and overtime check each workweek.

The takeaway. Check commission pay against the minimum wage every workweek, test overtime under Section 7(i), and only call someone a booth renter if they truly run their own book.

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Written for owners of hair salons, barbershops, beauty, nail, lash and brow businesses, spas and massage, tanning, tattoo and piercing studios and med spas in the United States.

The short version

  1. Check commission against minimum wage every workweek.Divide the week's total pay by all hours worked, including waiting for walk-ins, cleaning and required training. Top up any shortfall.
  2. Test overtime in every week over 40 hours.Section 7(i) exempts commission staff only if the regular rate tops 1.5 times minimum wage and most pay, over at least a month, is commission.
  3. Use booth rent only for genuine renters.Fixed rent, their own prices, hours, clients, card processing, license and insurance. Your prices and your POS point to an employee.

Salons use three models: W-2 employees (hourly, commission or both), '1099 commission' stylists, and booth renters. The middle one is the riskiest. A stylist who must follow the salon's prices, schedule, dress code, product line and POS is an employee almost everywhere, whatever the paperwork says. The IRS uses the common-law control test, and states use their own tests for wage law and unemployment insurance.

What a genuine booth renter looks like

  • A fixed weekly rent regardless of sales.
  • Their own prices and hours.
  • Their own clients and booking.
  • Their own card processing and products.
  • Their own license and insurance.
  • Free to work elsewhere.
W-2 commission stylist against a booth renter, a year
Service sales from one W-2 commission stylist$90,000
Commission at 45%-$40,500
Employer FICA at 7.65%-$3,098.25
FUTA: 0.6% x $7,000-$42
Product at 8%-$7,200
What the salon keeps$39,159.75
More than a booth renter paying $250 a week ($13,000 a year)$26,159.75

$39,159.75 minus $13,000Before front desk, workers' compensation, state unemployment and management time, and only if you can fill the chairs and carry payroll. Indicative. As of Oct 2026.

The rule

California's cosmetology exemption

California applies the ABC test unless the cosmetology exemption is met for a licensed barber, cosmetologist, esthetician or electrologist (check the current text for manicurists); if it is met, the older Borello test then decides status. The exemption needs all of these: the worker sets their own rates, processes their own payments and is paid directly by clients; sets their own hours and chooses their clients; has their own book of business and schedules their own appointments; holds their own business license; and, when working at the salon, issues a Form 1099 to the salon for the space rented. Willful misclassification costs $5,000 to $15,000 per violation, and $10,000 to $25,000 for a pattern. As of Oct 2026.

California Lab. Code 2775, 2778 and 226.8

The commission check, every workweek

Minimum wage is checked per workweek: total pay for the week, with commission counted in the week earned, divided by all hours worked, including waiting for walk-ins, cleaning and required training (29 C.F.R. 778.104). The federal floor is $7.25. California is $16.90; New York $17.00 in New York City, Long Island and Westchester and $16.00 elsewhere; Florida $15.00 from September 30, 2026; Texas $7.25. Cities such as Los Angeles and San Francisco are higher. As of Oct 2026.

A Fresno stylist on 45% commission, one week
Commission earned in 40 hours ($14.00 an hour)$560
Top-up to California's $16.90 minimum$116
Minimum pay for the week: 40 hours x $16.90$676

Commission-only workers in California must also be paid separately for rest periods (Vaquero v. Stoneledge Furniture (2017) 9 Cal.App.5th 98). As of Oct 2026.

The rule

Overtime and the Section 7(i) exemption

Overtime is 1.5 times the regular rate over 40 hours a week, and commissions go into the regular rate. Salons can use the Section 7(i) exemption for commission employees only when the regular rate is more than 1.5 times the minimum wage in every overtime week and more than half of pay over a representative period of at least one month is commission. For example, a Dallas barber earning $380 commission in a 44-hour week has a regular rate of $8.64, below 1.5 x $7.25 = $10.88, so the exemption fails that week and overtime is owed at half the regular rate for the 4 extra hours: $17.27 more. As of Oct 2026.

FLSA s.7(a); 29 U.S.C. 207(i); 29 C.F.R. 779.412 to 779.417

AvoidDeducting the card processing fee from card tips at a California salon.
Do this insteadPaying card tips in full by the next payday. Federal law lets an employer deduct the card fee proportionally, but California does not, so check your state.

California bars the deduction (Lab. Code 351), and owners and managers may never keep any part of employees' tips (29 U.S.C. 203(m)(2)(B)).

No deduction for shears, uniforms, product or breakage may take pay below the minimum wage that week (29 C.F.R. 531.35), and California also requires you to reimburse necessary work expenses (Lab. Code 2802).

Non-competes are state law. California voids them for employees and contractors (Bus. and Prof. Code 16600). Texas and Florida can enforce a reasonable covenant, and in Florida a non-solicitation of salon clients for 6 to 12 months is easier to defend than a 2-year, 25-mile non-compete. Booth renters own their own clients: write it down.

Asked in Greymill

Example question and answer from Staff & HR
You
Fresno salon. My stylist on 45% commission earned $560 last week in 40 hours, so that's what I paid her. My other two are '1099 stylists'. They use my prices, my booking and my card reader, but pay their own taxes. Am I OK?
Staff & HR
Not on either count. She is $116 short that week, and the '1099' label is unlikely to hold.

Her pay: $560 / 40 hours = $14.00 an hour
California floor: 40 x $16.90 = $676 (As of Oct 2026)
Top-up owed: $116

Count every hour worked, including waiting for walk-ins and cleaning. Commission-only staff in California must also be paid separately for rest periods.

The '1099 stylists': your prices, booking and card reader point to employees almost everywhere, whatever the paperwork says.
In California, the ABC test, its test for who is an employee, applies unless they meet every condition of the cosmetology exemption.
Those include setting their own rates, processing their own payments, booking their own clients and holding their own business license.
Willful misclassification costs $5,000 to $15,000 per violation (As of Oct 2026).

Want me to run this check on every commission stylist, week by week?

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Your question

I run a salon or beauty business in [state], in the US. My team: [number] W-2 employees on [hourly, commission or both], [number] '1099 commission' stylists and [number] booth renters. For each commission employee, here are hours worked including waiting time [hours] and commission earned [amounts] for the last [number] workweeks. Check every week against the state and city minimum wage and overtime, tell me who looks like an employee rather than a renter and what to change, and draft a booth rental agreement summary that matches how we actually work.

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Sources

The primary sources behind this lesson, checked Oct 2026.

  1. Rev. Rul. 87-41 (Classification: W-2 or booth renter)
  2. Lab. Code 2775 and 2778 (Classification: W-2 or booth renter)
  3. California DIR 2026 rate; New York DOL 2026 minimum-wage poster; FloridaCommerce 2026 minimum-wage poster, including $3.02 tip credit (Wage and hour on commission and tips)
  4. Wage Order 2 sec. 3(D); Vaquero v. Stoneledge Furniture (2017) 9 Cal.App.5th 98 (Wage and hour on commission and tips)
  5. 29 U.S.C. 203(m) (Wage and hour on commission and tips)
  6. NY DOL, Minimum Wage for Tipped Workers; 12 NYCRR Part 142 (Wage and hour on commission and tips)
  7. 29 C.F.R. 531.35; Lab. Code 2802 (Wage and hour on commission and tips)
  8. B&P 16600, 16600.1, 16600.5; Tex. Bus. and Com. Code 15.50; Fla. Stat. 542.335; BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999) (Non-competes, client lists and hiring)
  9. 18 U.S.C. 1836; Cal. Civil Code 3426 (Non-competes, client lists and hiring)
  10. Fla. Stat. 448.095; Lab. Code 432.3; NY Labor Law 194-b (Non-competes, client lists and hiring)
  11. FTC September 5, 2025 release, dismissal of both appeals and acceptance of vacatur; 91 FR 6507, section I.C and removal of 16 CFR part 910 (Non-competes, client lists and hiring)
  12. Florida Statutes s. 448.095(2)(a) and (b)2, private employers with 25 or more employees must verify each new employee through E-Verify (Non-competes, client lists and hiring)
  13. Publication 15 (Worked in dollars: utilization, commission against booth rent and deposits)

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