Most owners know the federal rules for 1099 vs W2 look at control: who sets the hours, prices and supplies. The ABC test is stricter. It starts by assuming the worker is an employee and makes the business prove otherwise, on three separate points.
This article explains how the rules generally work. It is not legal or tax advice. State laws change and apply differently depending on the purpose, such as wages, unemployment or taxes. Confirm your situation with an employment attorney or CPA in your state.
This is part of our guide to paying nail techs as 1099 vs W2.
The three prongs, for a salon
A worker is an employee unless the business can show all three:
A: Free from control
The tech decides how, when and for whom they work. In a salon, that means the tech sets their own hours, prices and services, and the salon doesn't direct their work. If the salon sets the schedule, the price list or the turn order, prong A is in trouble.
B: Outside the usual course of business
The work has to be outside what the business normally does. This is the one most salons can't pass. A nail salon's business is doing nails. A nail tech doing nails at that salon is exactly the usual course of business. The same goes for a stylist at a hair salon or a barber at a barbershop.
A plumber fixing the salon's sink would pass prong B. A tech doing manicures doesn't.
C: An independent business
The tech has their own established business doing this work: their own clients, their own business license, their own marketing, and the ability to work for others. A tech who only works at your salon, on your terms, usually doesn't pass prong C.
Which states use the ABC test
States use the ABC test for different purposes, and a state can use it for one law and not another.
For wage laws (minimum wage, overtime, wage payment):
- California: the ABC test applies broadly, under the law often called AB5.
- Massachusetts: one of the strictest versions.
- New Jersey: for wage laws and unemployment.
For unemployment insurance only: many more states, including Connecticut, Illinois and Vermont, use some version of the ABC test to decide who's covered.
Everywhere else: the federal tests from the IRS and Department of Labor still apply, along with your state's own rules, which may follow those tests or something close to them.
The list changes as states pass new laws and courts decide new cases. Check your state's labor department or unemployment agency for the current rule.
California's salon exceptions
California is the state salon owners ask about most, because its rules for beauty professionals are specific:
- Nail techs (licensed manicurists): California's law had an exception for manicurists, but it ended on January 1, 2022. Since then, manicurists fall under the ABC test, which a tech working at a nail salon rarely passes.
- Hair stylists, barbers, estheticians and electrologists: they can still fall under an exception, and be judged by California's older, more flexible test, if they meet conditions like these:
- They set their own prices and process their own payments, paid directly by clients.
- They set their own hours and keep their own book of clients.
- They hold their own license.
- They run their own business, which can include renting a booth or suite in a salon.
If those conditions aren't met, the ABC test applies to them too. The exact wording matters, so confirm with a California employment attorney.
What tends to pass, and what doesn't
| Arrangement | ABC test outlook |
|---|---|
| Commission tech on the salon's schedule, prices and turn rotation | Fails. This is an employee. |
| "1099" tech with the same schedule, prices and turns as W2 staff | Fails. The form doesn't change the facts. |
| Booth renter who sets own prices and hours, keeps own clients, pays fixed rent | Better chance, and may fit a state exception for licensed beauty pros |
| Tech running their own business from a salon suite, with their own license and clients | Strongest position |
What to do if you're in an ABC-test state
- Assume working techs are employees unless they truly run their own business. In most salons, that means W2.
- If you offer booth rent, make it real: the renter sets their own prices and hours, keeps their own clients, uses their own supplies, pays a fixed rent and isn't given walk-ins from your rotation. (See is a booth renter an employee or contractor?)
- Don't rely on a tech's request or a signed agreement. (See my nail tech wants 1099. Am I still liable?)
- Talk to a local employment attorney or CPA before changing anything, especially about how to handle past periods.
- Keep clean records of hours, services, earnings and tips, whichever way you classify.
SupaDay helps with the records. Commission tracking shows what each tech earned by service and by week, with card and cash tips separated, ready for W2 payroll or a booth-rent review.
The bottom line
The ABC test flips the usual question. Instead of asking whether a worker looks like an employee, it assumes they are one until the business proves otherwise on all three prongs. For salons, prong B is the hard one: a tech doing nails or hair at your salon is doing exactly what your salon does. In ABC-test states, plan on W2 for working techs, or set up a booth rental that's genuinely independent. See how SupaDay tracks per-tech earnings →
