It often seems that the only thing more common than coffee shops on Portland street corners are neighborhood nail salons.

It's a domain of manicures, pedicures and shellac, and it's populated by immigrants: Vietnamese nail technicians could account for about one-third of all new licensed nail techs in the state.

The Oregon Health Licensing Agency keeps track of the number of licensed nail technicians in the state, and it counts almost 14,000 in Oregon—with nearly half in Portland. Until 2009, the state agency offered licensing exams in Vietnamese. That year, when the special test was dropped for fairness reasons, 30 percent of test takers took advantage of the Vietnamese-language exam.

An audit this year of one salon by Oregon's Department of Consumer and Business Services offers a rare glimpse into that working world. It also reveals a disturbing trend for cash-strapped Oregon.

The audit looked at the Nail Studio at Lloyd Center, next to the mall's Northeast Halsey Street parking garage. According to the audit, Dave Lam, the owner and a Vietnamese immigrant, employed seven technicians whom he called independent contractors. He charged each technician $800 a month for her nail station, where customers could get $15 manicures with polishes like "A Good Man-darin is Hard to Find" and "I'm Suzi and I'm a Chocoholic."

This arrangement, according to the audit, was a mischaracterization of employees. By calling his workers independent contractors, an employer avoids expenses like unemployment and workers' compensation insurance. The practice of declaring a worker his or her own boss also costs Oregon an unquantifiable amount each year in unpaid or late payroll taxes.

"Because of today's troubling economic climate, [this practice] seems to be on the rise," says Derrick Gasperini, a spokesman for the Oregon Department of Revenue.

And Gasparini thinks that it is likely that many more nail salons are erroneously treating employees like independent contractors.

To legally qualify as an independent contractor, a nail technician has to be "free from direction and control" by an employer. But the audit suggests Lam not only handled customers' payments but determined how much technicians could charge. Compare that with an independent hairdresser who sets her own hours and prices, for example. She would probably qualify as an independent contractor.

Lam says he simply didn't know any better and that he ran into trouble because he adopted the practices of the previous owner when he bought the Lloyd Center salon about a year ago. He has since dropped the practice of charging his nail technicians for their workspace, he says. After getting slapped with a $3,800 fine for not having workers' compensation insurance, Lam says he now complies with Oregon law.

"This is my first business," says Lam. "We had to learn the hard way."

It's not just the state's bottom line that's hurt when employers misclassify workers. Employees miss out on benefits like unemployment payments if they lose their jobs and their bosses didn't pay unemployment insurance. And they're still on the hook for Social Security taxes, among others, if their employers fail to withhold them. "They can unwittingly be incurring tax debt for themselves that they will have to pay later," Gasperini says.

The Rev. Joseph Santos-Lyons, a coordinator for the Asian Pacific American Network of Oregon, says Vietnamese nail salon workers get little attention, though they are part of a fast-growing group of Oregonians. "Asian Pacific workers in general are really isolated," Santos-Lyons says. "In Portland, they're still pretty invisible."

A new coalition of health regulators and advocates for immigrants has emerged in Oregon to begin to address this. Another concern for nail salon technicians—and those who are immigrants and uneducated, in particular—springs from uncertainty about the possible health impact of the chemicals typically found in nail salons. P.K. Melethil, one of the organizers with the Oregon Collaborative for Healthy Nail Salons, says the group will begin to collect personal stories from workers this summer to get a better sense of what other barriers they may face. "This particular sector is in need of some support,” Melethil says.