The newly imposed requirement is intended to add a level of accountability to ensure that workers are paid what they're legally owed.
Those cheap manicures in New York City are more costly than you think.
A New York Times exposé published last week revealed that manicurists in New York City are often subjected to wage theft and heath hazards as they toil over customers’ hands and feet.
New York Governor Andrew Cuomo, for one, is none too pleased. On Sunday, he outlined a series of steps the state will take in an attempt to stem the nail salon industry’s abuse of workers.
Effective immediately, a state task force will investigate salons individually and will implement new rules that force salons to protect nail technicians from harmful chemicals contained in nail care products by requiring workers to wear gloves and masks. Salons must also post notices that explain to workers that it’s illegal to work without wages or to pay for the opportunity to secure a job.
Tucked within those straight-forward remedies is a rather wonky solution: every nail salon must secure either a bond or expanded insurance policy to cover claims for unpaid wages as part of its licensure. That requirement is intended to add a level of accountability to ensure that workers are paid what they’re legally owed.
Wage bonds are nothing new for some industries. They’re an especially common policy in public works construction projects, where a contractor that wins a bid must buy a bond to guarantee that even if the company goes under, workers who put in time on the project will be paid. A 2011 report from the National Employment Law Project found that—at the time—38 states required employers to post bonds for at least some jobs, most typically for those in public works and construction. Nine states required bonds for employment agencies and six did so for farm labor contractors as a condition of licensing.
“Historically, [bonds are] used in any context where there’s a big failure rate in business,” says John Thomas, a professor at Quinnipiac University School of Law, who traces the use of such bonds to the 1800s.
The use of wage bonds to address the needs of low-wage workers is somewhat new. In 2003, California passed a law requiring car wash owners to register their businesses with the state labor commissioner and post a bond of $15,000 as insurance against wage and hours claims. The impetus for the legislation was “employers going in and out of business so frequently,” says Janice Fine, a professor of labor studies and employment relations at Rutgers’s School of Management and Labor Relations. “If there’s no successor requirement or bonding, there’s no way to hold owners accountable for things like wage theft and accidents.”
While wage bonds ensure that workers are paid even if the employer goes out of business, the upfront payment—usually 5% of the bond—also serves as a means to discourage wage theft from the outset. The bonds are put in place “to make sure that companies are capitalized and solvent enough to be in business, and to make sure that should anything happen and workers file for unpaid wages, there’s money there to compensate them,” says Tsedeye Gebreselassie, a senior staff attorney for NELP.
For wage bonds to achieve those two objectives, they need to be costly enough to serve as a deterrent. In that regard, California’s car wash law should serve as a cautionary lesson for New York. During the first three years of the law’s implementation, total registration of car washes grew from 18% to 63% and investigations and citations increased, but large numbers of car wash businesses continued to operate in violation of labor laws even after being penalized, according to Fine. The latest iteration of the law, effective in 2014, increased the bond amount from $15,000 to $150,000 in hopes that the higher cost will have a meaningful effect on labor practices in the industry.
The enforcement of the New York rule will be key, especially since—as the New York Times detailed—many manicurists are in the United States illegally and may be afraid to speak up about labor violations. “It’s gonna take worker centers and union organizing—along with the state proposing to do this—to [reach] a tipping point where employers get serious about paying workers more,” Fine says.