Improperly Classified: What To Do When You’ve Been Misclassified as an Independent Contractor

I’m going to give a quick review here for those of you that hit this page before you read this article about how to tell whether you’re being improperly classified.

If your salon owner has you classified as an “independent contractor” but has you working their hours, wearing a uniform, attending mandatory meetings/training sessions, has you on their payroll, and dictates to you how to do your job, you are very likely not an independent contractor. Here’s a link to the IRS website for more details on that. 

What do you do if your salon owner misclassified you as an independent contractor?

First, read this postMany salon owners make this mistake unintentionally. I recommend bringing your concerns to the salon owner before taking any further action. Once you’ve done your research and gathered your facts, schedule a meeting and present it to the salon owner. Let their reaction inform your decisions from there.

Then, file this form with the IRS. Filing this form will cause the IRS to launch an investigation into your employer’s business practices. If they determine that you were misclassified, the status of all other employees (past and present) will be evaluated. Should the IRS determine that the owner misclassified others, they will generally be fined and held required to pay all of that employment tax back.

Next, find a new job. This owner is probably going to fire you anyways for reporting them to the IRS. Even if they don’t, it’s unlikely that they’ll survive the audit.

“So what if I’m misclassified? What’s the big deal?”

The big deal is that you’re responsible for paying 15.3% of your total earnings at the end of the year in “self-employment” tax. If you have been being controlled as an employee, you weren’t self-employed, so you should only be paying half of that and having your employer contribute the other half.

You’re also not eligible to collect worker’s compensation or unemployment, since you’re not paying into it. You’re not entitled to the prevailing wage or overtime, which means the salon owner can schedule you to work a 65-hour week and send you home with little (or no) guaranteed base wages or overtime pay.

you’re getting shafted so the salon owner can evade taxes and their wage obligations to you.

They’re making those expenses your problem, all while leaving you without rights and protections every American employee is provided.

So, fill that form out and get what is yours. If you’re paying self-employment tax, you need to be enjoying the freedom that you are entitled to as a self-employed person. If you are you’re your own boss, you should be acting accordingly.


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33 Responses

  1. Ok so a whole group of people got fired from a salon in Denver Co. We all left outraged as we were all independent contractors. Getting paid as commission based, ok so one of the girls that left with us decided in opening a new salon now we are all working for her as independent contractors but paying some of the girls out as commission. I am confused she calls me a Booth Renter I pay her rent each week i use all my own supplies, and at the end of the year i do a 1099 i choose my own hours the salon is new so not so much clientele. This is my 2nd salon the 1st I know she was crook i just do not want to be taken advantage. The new owner also has us sign a contract. Help me how can I protect myself is there a state regulations or a book i can look for??

  2. It sounds legit based on what you told me, but I’d have to see the contract to be sure. Since the new owner is your friend, you might want to tell her to email me so that I can make sure she’s not putting herself in a position to get screwed. A lot of people go into this business doing things “the way they’ve always been done” which in most cases is illegal.

  3. I have filled out this form for the IRS that was provided. Plain and simple I’m a barber I moved two states away for this job and had talked to the employer about being misclassified he laughed in my face, after a month of being stressed out beyond belief I started asking fellow employees what they thought of it. A week after inquiring with coworkers I recieved a phone call and he said I was fired (admitting I was employee) also said it was for inquiring about my employment status which to my understanding is wrongful termination. So I had to basically move back to my home state otherwise be homeless. Now having to re establish my life after 7months of being gone. Since I filled out the IRS form among two other employees had as well he figured out I turned him in and is threatening to sue me. Point of the story can I sue him for wrongful termination tax misclassification and having to move my life (emotional stress which caused an ER visit for what I thought was a damn heart attack)….I have had two attorneys say yes but it isn’t a big enough case for them to take. I just need solid advice PLEASE!

    1. Theoretically, you could sue anyone for anything–whether or not you win is debatable. I’m willing to bet the reason neither attorney would take you on is because they questioned your ability (or the defendant’s ability) to pay. My advice is not to worry about it until you’re served. At that point, you can retain an attorney who can advise you on whether or not you have grounds for a countersuit for retaliatory termination.

      1. So I am basically screwed when it comes to footing the bill for all of my taxes this year even though I was an employee? He is more than likely just trying to scare me away from turning him into the IRS or DOL by saying he will take me to court he has no basis for a case. I just am in a rock and a hard place because I don’t have the $ to pay taxes this year because how I was paid as well as he hasn’t provided my 1099 or income reports which by Oregon law is illegal they’re allowed to charge for printing but have to give me them if I request.
        Thank you so much for all of the education on this site it is much needed in this industry and I greatly appreciate all of your help!

        1. I actually don’t think you’re screwed. When you file the SS-8 you can choose to file as if you were W-2, and only pay the amount you would have had to pay if you were classified appropriately. Once the IRS makes their determination (which I believe will show you were an employee and that your ex-employer has to make up the other half of your taxes), you’ll know the final amount due. (Again, I think you won’t owe anything additional, but that’s ultimately up to the IRS.)

  4. I work in a hair salon and pay my own taxes. The owner gives me a 1099 every year. She gets very up set when my clients texts me for appointments. She doesn’t always let me set up my own appointments, she will tell them I have no time when I do. She’s always interrupting me when I have clients in my chair, telling me how to do things. It goes on and on. I’ve been doing hair now for over 30 years and have always had my taxes paid. I started working for her about 8 years ago didn’t really know why she didn’t pay my taxes until this year when I started doing some research. I have to ask, can I give out my own business cards and phone numbers and have access to the appointment book? Wendy

    1. Technically, you’re “self-employed.” You should absolutely be handing out your own cards. The appointment book issue is a sticky one, but I’m willing to be there’d be little she would be able to do about it, since she’s currently violating federal tax law.

      1. I also pay my own taxes. I file a 1099 form. I buy my own tools & gel, but not scrub, foot files, etc.I do not pay booth rent. If a client text me, that has come to her salon before, for an appointment, my boss throws a fit. These are the same client’s that I have done for almost a year now. One client did cancel because they were sick so I asked of they were ok a few days later. They were fine and asked me to book them, so I did. Boss is pretty pissed. When I started she told me to put the app to book people on my phone. Of I book a person from my precious job she’s cool. (1) Am I really doing anything wrong? (2) If I’m 1099, I’m self employed correct? She says I have to be at work a certain time even if I don’t have anyone. (3) Is that ok?

        1. 1.) You’re not doing anything wrong, other than calling her your “boss” when she clearly isn’t. You’re self-employed. You are your own boss.

          2.) Absolutely.

          3.) Definitely not. Renters pay rent and run their own businesses without any outside influence or interference.

  5. Could you tell me how she is violating federal tax laws? I’m really not sure. I know she’s getting a lot from me and I’m getting very little by the time I have to pay all the taxes I pay.

    1. You’re not being appropriately classified. That’s how she’s violating federal tax laws. Employers routinely do this to avoid having to pay employment taxes, so it’s considered tax evasion.

  6. Hello,
    I’ve read the super informative (and refreshingly entertaining) articles on this website and must admit my frustration since graduating cosmetology school. I’ve been searching aimlessly for a position (and tried a few bad eggs) that offered an “apprenticeship” in attempts at allowing myseld to just get the “leg up” I feel I still need as a new professional, to enter the industry as a stylist. It’s been either slave labor as a glorified cleaning lady with very little education to be had (the reason I sought out an “apprenticeship was FOR the perceived need of additional EDUCATION right?) or simply “assisting” where it’s all WATCHING and helping but no DOING of hair allowed… Call me crazy but I’ve got to DO to learn… So the latest is now the “perfect” (so it seemed) job opportunity… Great schedule, great education plan offered, I’d also be trained on front desk and helping with cleaning duties but minimal, advertising, business cards and products all provided, etc… Clearly an EMPLOYEE relationship… But upon inquiring about pay structure the owner said its hourly the first 90 days then “pure comission” at 40% (no min wage if you don’t make that…). To make matters worse she said “we pay you with a 1099 so we technically can’t dictate the hours you’re here, but I mean there’s obviously hours that are more beneficial for you to be here…..” Here’s my issue… Is there a way you recommend talking to a would-be employer if you suspect that they may be, to be blunt, ignorant, that this practice is illegal and scandalous in a way that may end in me still having a favorable outcome? That being a w2 and fair wage?
    Auspicious In Austin

    1. I actually have a post for that here:

      I’m also fond of saying that if a salon owner can’t afford to pay a new hire and classify them appropriately, they’re not likely in need of a new employee. In order for a job offer to be valid, there must exist actual compensable work to be done–so, like, real clients and real demand for services. If there aren’t enough clients to sustain a new employee, the employer isn’t offering a “job,” they’re looking for someone to sit in their salon and maybe make money for them. Those people have no business owning a business to begin with. If you wanted to be self-employed, you would rent a booth and keep all your money, instead of taking on the owner’s risk and responsibilities and handing them the majority of your income and handing another 15.3% of your income to the federal government. It’s ludicrous for any reasonable person to expect that of anyone else, and if an employer put that expectation on me, I’d laugh them out of the interview, after pointing out in explicit detail how amateurish and unprofessional they are, lol.

    2. So, basically, Plan A: be educational and professional, Plan B: be real. Employers who make those demands are people who don’t respect you, so they aren’t worth your respect in return.

      1. Thank you. Taxes are a neccisary evil but after calculating the roughly 20% commission I’d be working with after taxes (nearly 10% of which weren’t even fair for me to be paying) how could someone expect anyone, let alone a stylist fresh out of school to survive on that? It’s not as if I’d have any write offs to claim to whittle the number down: she’s claiming all of those… Double whammy…

  7. I’m confused,I currently work at a spa,as a employee ,only paid upon service and not required to stay but aval for service the days we are being told we must stay our entire sch time even if no clients, but will not be compensated hourly,advise please I think your are saying they must comp us for time in office if required to in office

  8. My daughter is a stylist in California and pays booth rental monthly. She has been working at the salon for two years and this year she requires the stylist to fill out papers for a 1099. I thought a 1099 was for money paid to a person. She sets her own hours, has her own clients and buys her own products. Is the 1099 for salon’s own personal gain?

    I would classify my daughter as a booth renter, not independent contractor. Thoughts?

    Thank you

    1. Booth renters are self-employed so they are independent contractors. Her classification is correct, but the salon owner is likely mistaken. The renters must be providing her with a 1099 for rent paid, not the other way around. However, some salon landlords collect payment from clients and issue checks to renters, which isn’t a proper practice (or a legal one) but is again a really common screw up a lot of owners do because so many others before them have done so also. Find out if the landlord is issuing checks. If so, the entire situation should be reevaluated. If you search this site for articles about booth renters, you’ll find several relevant posts. I also recommend reading my 20 Factors post (use the search bar, it’s also tagged for renters I believe so it should show up in either search).

  9. I am working at a salon as a hair stylist and I receive a 1099. I am classified as an independent contractor. I signed a contract stating I cannot work within a 5 mile radius of the salon after I quit. I have to abide by rules ,have a dress code and I have to answer phones and do chores,wash towels clean shop ect. She supplies everything in the salon.We have mandatory meetings and we do not get paid for them.We do not get payed vacation. I have nothing to claim..because she buys everything. I know I am not classified correctly. Can I jus go to the IRS office and open a case..what should I do And because the company is and LLC. company now will that interfere with my report to the iRS.Is my boss allowed to give us 1099 and we are clearly her employees because of that?

    1. You can. Going in person is helpful because you can have your questions answered, but you can also file an SS-8 form online. Their business structure will not affect your report whatsoever. And no, she’s not allowed to give you a form exempting herself from federal tax and employment law. You can read this post and this post for more clarification.

  10. I am in a situation where we are 50/50 salon primarily doing lashes. We have to supply all lash supplies. Owner supplies wax, microdermabrasion machine, and facial products. But 90% of the time we are only doing lashes. We have to dress “chic”, we must wait in salon until 5pm for clients then can leave. We are asked to get in our cars and go market at hotels and bridal shops if we have 2 hours or more in between clients. We are 1099 yet have rules to follow like employees and have our own insurance to cover our services if anything happened. So thinking about all the money spent on supplies, including adhesive that is $80 and replaced every 3 weeks, is a lot. Also just the demeanor towards us is like she is our boss…Are we misclassified and what can we do?

  11. Hi Tina: Your web site is fantastic. I am an accountant and aware of a salon that pays everyone by commission (classifying them as “independent contractors”) schedules the “contractors” appointments, collects their money and pays them their percentage once a week. I believe that most supplies are paid for by “contractors.”

    This appears far from independent to me. When reading your second paragraph above, you cite “has you on their payroll.” Would they, in fact, NOT be on their payroll and that would be the problem? Maybe this just means that they are on their payroll as contractors?

    Thanks in advance for any reply.

    1. Hi Anne! You’re absolutely correct. The independent contractor classification is nearly always misused in our industry. (This post explains why in more detail than this one does.) What I mean by “has you on their payroll” is this: the salon owner routinely pays the so-called “contractor” in the same way they compensate employees. The “contractor” receives a paycheck every two weeks, but taxes aren’t deducted. If the contractor were a true contractor, they would be working on a job-by-job basis, contracted for each assignment. They would not be issued checks routinely the way an employee is, as there should be no expectation of a continuing relationship.

  12. Just found your page and already am a huge fan!
    I am a massage therapist in Ohio and have long since come to the conclusion that I am being misclassified as an independent contractor and happily sent in my resignation!
    However, in the meantime I still have to deal with certain things that I am wondering about. 1.) the owner tries to force me to come in or stay when nothing is on my books. Also states that the only one allowed to block out time is her (HUGE red flag that I wish I’d have realized before!) How should I handle this?
    Also, I have a handbook (another red flag!) and in it there is a portion that states that if I don’t show up I can be charged 25 bucks per hour that my schedule is open (I don’t even make that per massage!). I don’t know how to handle these for the next couple of weeks without going crazy! This place is an hour drive so it is really ridiculous for me to drive all that way and sit for several hours for no reason! Talking to the owner would be difficult as she has already proven herself to be unapproachable to me. Also, there are so many super sweethearts that work there so I really don’t want to file a complaint with the IRS and potentially cost them their jobs 😩

    1. Well, if the owner has demonstrated that they aren’t capable of reasoning with you, they’ve given you little choice or incentive to work through the rest of that notice. Unless you feel it’s really important to stick it out (and I wouldn’t judge you–everyone has their reasons), my opinion–and that of the law–is that you aren’t obligated to anyone who isn’t gainfully employing you.

      As for reporting, you really should. While there’s a possibility the owner will close up shop, there’s also the possibility that they won’t. In any case, every single one of those professionals deserve better than what they’re getting. Filing that SS-8 will ensure they get what they’re owed and that the owner never does that to anyone else ever again.

  13. I am a salon owner and want some clarity on how this should be set up. If I have independent contractors, is this true that I can’t contract them for a couple of month or for the year on a per service basis? If not, they need to pay me for each time they come in when I contract them to? Pay them a check every time they come in and leave?

    1. It depends on the professionals you’re contracting. If you’re a salon owner contracting salon professionals who perform services employees would normally perform, you’re likely using the classification inappropriately. If you’re utilizing professionals who offer services outside of those employees would normally perform, you’d want to make sure to establish clear work agreements that clarify the terms of the arrangement.

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