Many salon owners try to protect their business by having their professionals sign non-compete agreements or contracts that contain a non-compete clause.
A non-compete is an agreement on the part of the employee to not enter into or start a similar profession or trade in competition against the owner.
Generally, these agreements are bound by distance (for example, a non-compete might only be limited to a 5 or 10 mile radius of the business address). Salon owners create these clauses mainly to protect their client lists, believing that if a professional quits or is fired, the clients will not follow them if they are forced to work too far from the owner’s location.
The states vary in their laws regarding the enforceability of non-competes, but often, unreasonable contracts will be seen as such and will not stand, especially if the salon owner chose to write the document themselves instead of having a qualified attorney do it for them.
If you are considering employment at a salon that requires you to sign a non-compete or if you are planning on having your staff sign non-competes, continue reading for more information.
Generally, a non-compete:
1.) must be reasonable,
2.) must be extremely detailed,
3.) can only apply to employees, NOT booth renters or independent contractors (if you’re not paying their employment taxes–they’re self employed)
No matter what, a non-compete must conform to the laws in your jurisdiction regarding non-competes.
Defining Distance & Dates
Be considerate of your employee when drafting your non-compete. A non-compete that states: “Employees agree not to work in any beauty industry profession in [CITY] for the rest of their lives,” is not reasonable for several reasons.
- The “beauty industry” covers many different professions,
- The entire city is too broad of an area, and
- The rest of the employee’s life is too long.
Those non-compete terms make it seem as if the employer is trying to restrict that employee from working in any beauty-related field for the rest of their lives unless they work in another city. A judge will very likely declare that to be unenforceable.
Write an agreement that you wouldn’t have a problem signing if you were the employee.
In our industry, a reasonable distance is a 1-3 mile radius from the location of the salon at which they were employed. (If you own a franchise or run multiple locations, it’s not wise to set terms that include those locations that the employee did not work at.)
A reasonable time period during which the employee may not compete is 6 months to 1 year. Any longer than that, and you’re likely going to have a really difficult time enforcing the non-compete if you have to.
The conditions of the non-compete need to be spelled out explicitly, leaving no room for interpretation. If you hired someone as a stylist, you can write in the clause that they cannot take employment as a stylist in the radius you specify, but you probably should not state that they cannot work as a cosmetologist in the radius. Let’s say your stylist leaves you and takes a job next door working as a nail tech. A judge is not likely to enforce the non-compete because cosmetology is too broad of a field. The stylist, in her new position as a manicurist, is not competing with your hair salon business in that situation.
Alternatives to Non-Compete Agreements
A non-compete is not the best way to protect your salon’s clients, in my opinion. I have repeatedly seen these agreements struck down, regardless of how reasonable and specific they are. Data Theft Protection and Non-Solicitation Agreements are far more specific, don’t restrict the worker’s ability to earn a living after separating from your business, and protect what really matters (the salon’s client records).
Appropriate Applications of Non-Compete Agreements
I consider non-compete agreements to be necessary and appropriate for employees in executive management positions. These employees are privy to internal company secrets that other employees normally are not. They know your vendors, your product formulas, and the intimate details of your business operations. If anyone were capable of leaving your salon and establishing a business designed to compete directly with yours (armed with the information they gained during their employment with your business), it’s them.
In my role as a manager, I was routinely expected to sign non-compete agreements, and did so without complaint or argument. Management employees often have proprietary information that gives them a serious competitive advantage, should they choose to leave your business and establish their own, so hire an attorney to properly write a binding, restrictive NCA to keep them from using that information against you.
“I applied to a salon but the owner wants me to sign her non-compete! Should I?”
I get this question a lot. The simple answer is, “It depends.”
Don’t agree to unreasonable employment terms out of desperation and do not be overly optimistic when entering an employment agreement. If you don’t feel comfortable signing, you can negotiate the terms.
1.) Are the terms reasonable?
2.) Will I be able to comply with the terms of the agreement?
3.) Am I 100% comfortable signing this?
4.) Is the contract appropriate with regards to how I’m being classified? (booth renter, independent contractor, employee)
Remember, if you are a booth renter or freelancing independent contractor, you’re a business owner yourself. You are INDEPENDENT. A non-compete restricts competition and strips you of your independence, so typically, it’s not an appropriate document for your classification. You’re not the owner’s employee.
If the contract “feels wrong,” it probably is.
If there are any term you don’t feel right about agreeing to, mention it and attempt to renegotiate it. If the owner is unwilling to compromise, walk away.