Report them immediately. They know damm well that’s not how the prevailing wage obligation works. Here’s the link.

I recommend buying my Compensation and Pricing Megakit. It will allow you to plug in your costs and service times and will calculate compensation rates for you. It also contains a ton of information about how to reduce labor costs, make services more efficient, and cut dead weight from your team (all of which sound extremely necessary in your situation). If you’d like to schedule a consulting appointment, you can do so through my online booking system at https://thisuglybeautybusiness.com/book-now

If you file an SS-8 with the IRS, you’re likely to be determined to be an employee, which means you’ll be eligible for all the protections granted to employees. So, if you’re fired as a result of bringing up these abuses of the law, that would be considered retaliation and the termination would be deemed unlawful. The IRS and DOL would work to ensure you get your wages and taxes back, and the EEOC would punish the employer for the wrongful termination. Basically, he’d be an idiot to “fire” anyone he doesn’t legally employ, especially since he’s in violation of federal tax and labor laws currently.

“This is how it has always been,” is not a valid or acceptable excuse. She’d never be able to successfully argue that in front of the IRS or any labor authority. I wrote an article here about why salon owners need to get their shit together and recognize that ignorance of the law will not excuse them from compliance.

Before you talk to her, read this article, where I explain how to prepare for that discussion and how to conduct it. Those tips might make it easier for you–but with owners like that, rational discussion tends to be impossible. They usually just want to keep exploiting people for their own gain.

I’d suggest a factual approach. The laws are clear–so long as they are clocked in and those hours are counting towards your prevailing wage and overtime obligations, they ARE being legally compensated. By law, they are obligated to obey you or forfeit their positions. That’s how employment works. They aren’t entitled to commission. They are EXTREMELY fortunate you’re able to afford such competitive commission rates and are willing to pay them so much, since they have invested and risked nothing, they need to recognize the salon’s money ISN’T “their” money.

Still, I have some recommendations for you to implement moving forward.
1.) For starters, immediately stop using the words “commission salon.” You are an FLSA-compliant “commission versus hourly” salon. It’s critically important to distinguish the difference.
2.) You said you “help build their businesses.” Stop that. They don’t have businesses. They are employees at your business. When you use those terms and perpetuate the notion that they have businesses to “build,” you’re giving them the impression they are responsible for (and therefore entitled to) more than they are. The fruits of their labor do not belong to them. They don’t call the shots. They–again–have risked and invested nothing. YOU run the business. You build YOUR business.
3.) Implement stricter management and more focused direction. If they’re sitting around, that’s a management failure salon owners like you and I only have ourselves to hold responsible for. It’s on us to make sure they’re on-task and doing their jobs. We are the leaders.
4.) Take charge of that schedule and start being more deliberate and strategic in how you plan shifts. The salon should never have more employees than it has clients to justify. Either people need to be let go or have their hours cut until their client demand and retention rates are high enough to justify their presence.

Your employees are exhibiting very typical behaviors I see in salons run by owners who are too nice. (Usually these owners were or are professionals themselves, so they give far more than they should and take more abuse than is acceptable.) Stop allowing them to feel as if they have ownership over the business. There’s a difference between creating an environment where employees feel valued, listened to, and like their contributions are recognized and one in which the employees feel empowered to hold the owner hostage. Sometimes, these conversations need to be had in a blunt manner so you don’t run the risk of employees hearing what they want to hear. That may mean very deliberately kicking that apple cart.