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.
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.
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."
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.
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