Reminder About the New Wage Bond Requirements For Nail Salons in NY

Flickr / Angie Chung / CC BY-SA 2.0


Surety bonds have frequently been used as a method for regulating both big and small industries in the U.S. Such is the case with a newly adopted rule in the state of New York, mandating that nail salon owners obtain a wage bond.

The deadline of Oct. 6 is just around the corner, so let’s go through all of the specifics: what led to the adoption of the bond, what it means for your business, how to get bonded, and how to make sure you stay compliant at all times.

Explaining Wage Bonds in NY

Before we dive into the matter, let’s take a quick step back and explain how wage bonds work. Wage bonds fall into the category of license bonds, which are types of surety bonds that many businesses need when they apply for their license.

Flickr / Shortcuts Smarter Business Technology /CC BY 2.0

License bonds act as a protection to a business’s customers, employees and/or the state. In the case of wage bonds, they make sure nail salon employees do not suffer any work violations such as delayed or insufficient pay. If a nail salon is found to be a violation, the bond will act as a source of funds to be used for worker compensation. Afterwards, the owner of the salon is under legal obligation to reimburse the sum used.

The new regulations for nail salons were signed into law by Governor Cuomo, shortly after a New York Times investigation put the spotlight on the state’s salon industry. The story uncovered countless labor violations in many nail salons, including wage violations, long hours, and abusive working conditions. A wage bond requirement, it is hoped, will help to clean up the industry and ensure that nail salon employees are treated fairly.

How Wage Bonds in NY Are Obtained

To obtain a wage bond in NY, you need to get in contact with a surety agency. Surety agencies are the intermediaries between surety bonds companies which underwrite the bonds, and the businesses that need them.

It’s important to understand that wage bonds in NY are credit-based, meaning that you can think of them as a line of credit given to your business. You pay a premium, which is a certain percentage of the bond, while the surety vouches that you are financially capable of paying the full amount in case of a successful claim against you.

As with getting any line of credit, your personal credit score plays a crucial role. The better it is, the more willing your surety will be to charge you a smaller premium, as you are perceived to be less of a risk. This fact has led two groups representing NY nail salons to file a lawsuit against Gov. Cuomo.

What the Lawsuit is About

The two plaintiffs are the Korean American Nail Salon Association of New York, and the Chinese Nail Salon Association of East America. The foundation of their claim is that there aren’t enough surety companies offering wage bonds, and that lack of credit history or bad credit will push many of nail salons out of business. They feel the bond amounts are not in line with similar requirements for other businesses, putting licensing out of reach for many.

So are there grounds to be worried? Not really, according to state representatives who claim that they have run numerous initiatives providing detailed information to nail salon owners on how they can get a wage bond. They also welcome anyone who has questions to contact them and get assistance. Furthermore, they say that 98.5% of all applications have been approved, so most owners– provided they offer proper working conditions– shouldn’t worry about their wage bond.

But what about salon owners who have bad credit?

How Wage Bonds Are Priced and the Role of Bad Credit

First, let’s look into the total amounts required by nail salons. Depending on the number of employees you have you will need to get a wage bond to the total amount of:

  • $25,000 if you have 2 - 5 full time employees who provide nail services
  • $40,000 if you have 6 - 10 full time employees who provide nail services
  • $75,000 if you have 11 - 25 full time employees who provide nail services
  • $125,000 if you have 26 or more full time employees who provide nail services

You can get a rough estimate of the price you will have to pay using your personal credit score.

Flickr / Angie Muldowney / CC BY-ND 2.0

If your credit score is good, meaning above 680, your premiums can be as low as 2%. Conversely, having a score as low as 600 will bring your premiums upward of 10%. An applicant with no credit history will pay a similarly higher premium.

If you are worried about your bad credit standing in the way of renewing your license, you should talk to your surety agent. A good surety agent can explain to you how to overcome the negative effects of your credit score. Often this happens by providing strong financial statements, both personal and business, as this signals the surety that you have the liquidity to pay off potential claims.

A good surety agency can help in other ways. A good rule of thumb is to look for one that works with a variety of bonding companies, as each of them will have different requirements, driving up your likelihood of getting the bond despite possible credit issues. Reputable surety agencies only work with surety companies who are A-rated and T-listed.

Once you get bonded, you will need to maintain your bond for as long as you have your license. Businesses like yours need to renew your bond every 4 years. If you don’t post a bond before Oct. 6 you can be fined and even forced to shut down. It’s also very important to understand the conditions of the wage bond in order to stay out of trouble, so make sure you understand how surety bonds work and read the surety form beforehand.

With the help of a good surety agency, and a solid understanding of legal requirements and best business practices, the future is still bright for nail salons in New York. If you’re a nail salon owner and you haven’t already obtained your wage bond, now is the time to act to make sure you’re in compliance with the new laws.

It’s normal to be confused about a first-time requirement like this. If you have more questions about your wage bond, make sure to contact one of our surety bond experts at (877)-514-5146. If you have already acquainted yourself with the new bond requirements, you can get a free surety bond quote online by filling out our online application (no obligations, approvals in minutes). As always, feel free to leave a comment below.


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About Lance Surety Bonds

Lance Surety Bond Associates, Inc. is a surety bond agency based out of southeastern Pennsylvania that is able to write all surety bond types in all 50 states. We are dedicated to servicing all of our customers' surety bonding needs throughout the country and guarantee competitive rates, timely responses, and unparalleled customer service.

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