by John R. Bauer, Guest Contributor
Lawsuits between salons and stylists over the enforcement of non-competition agreements are very common. Why? Because of what is at stake: clients. Who wins these lawsuits? Are stylist non-competes enforceable?
If you run an internet search, you will find multiple stories of judges enforcing stylist non-competes, precluding stylists from accepting jobs with salons or operating salons for six months or a year within some limited radius around the salon where they previously worked. But you also will find cases where courts refused to enforce stylists’ non-competes.
Why the different outcomes? The simple answer is: different facts and different states. The outcome of any lawsuit is determined by the facts of the case. However, law dictates which facts are relevant. State law governs the enforcement of non-competes and the law varies, sometimes significantly, from one state to the next. Even where the facts are almost identical, a non-compete may be enforceable in one state and not in another.
Generally speaking, however, except in California where all non-competes are unenforceable, a court will enforce a stylist non-compete only if the salon can show three things:
1. Enforcement of the non-compete is necessary to protect the salon’s legitimate business interest.
The most significant interest that a salon may seek to protect is customer goodwill. Courts will not enforce non-competes simply to prevent “ordinary competition.” But they will enforce non-competes to prevent stylists from taking clients away from salons. Whether the goodwill belongs to the salon or the stylist is a factual dispute that arises in many stylist non-compete cases. If the stylist brought clients to the salon, the balance weighs in favor of the stylist. If the stylist only developed clients while at the salon, the scales tip in favor of the salon.
2. The restrictions contained in the non-compete are reasonable.
Generally, courts will enforce stylist non-competes only if the salon can demonstrate the restrictions in the non-compete are reasonably related to the salon’s interest in protecting its goodwill with its clients. Courts generally insist that non-competes be reasonable in at least two respects: duration and geography. Courts often find that stylist non-competes longer than a year are unreasonable. A year gives the salon ample time to persuade the stylist’s clients to continue doing business with the salon. Also, the geographic limitation must be reasonable. If most of a salon’s clients live within a ten mile radius of the salon, a geographic limitation wider than ten miles may well be unreasonable. The geographic limitation only may be wide enough to discourage most clients from following the stylist to a new salon and no wider.
In some states, courts will rewrite non-competes that are unreasonable in duration or geography. A judge may reduce the duration of a non-compete from two years to one year. Or a judge may reduce the geographic limitation from a twenty-five mile radius around the salon to a ten mile radius. However, in other states, courts will not rewrite unreasonable non-competes, but simply refuse to enforce them.
3. The salon must have provided something of value to the stylist in exchange for signing the non-compete.
Often, stylists sign non-competes when they first begin working at salons. The “something of value” provided by the salon in exchange for the non-compete is the job. But what if the stylist does not sign a non-compete until she or he has been at the salon for six months or a year? Is “continued employment” sufficient? In some states, continued employment is enough and a non-compete signed months or even years after the stylist first began working at the salon may be enforceable. In other states, a non-compete signed after the start of employment is only enforceable if the employer provides some additional value other than continued employment. A pay raise or promotion, for example.
There are other factors that impact whether a non-compete is unenforceable. In some states, courts will not enforce a non-compete if the salon fired or laid off the stylist. Also, most courts will not enforce a non-compete if the salon failed to pay the stylist all that she or he is owed. In Massachusetts, non-competes are unenforceable if the employee’s duties and compensation changed after the employee signed the non-compete.
A lot is at stake in non-compete cases. Salons stand to lose clients if their non-competes are unenforceable. Stylists could lose their jobs and perhaps even be ordered to pay the legal fees of the salons that sued them.
Salons and stylists alike should take non-compete issues seriously and reach no conclusions about their enforceability before talking with attorneys in their state with experience in this area. Better to pay a little now than a lot later.
About the Author
John R. Bauer is a partner at the law firm Birnbaum & Godkin, LLP in Boston, Massachusetts (www.birnbaumgodkin.com). He represents clients in business and intellectual property lawsuits, including suits concerning the enforcement of non-competition agreements. John can be reached at firstname.lastname@example.org.
This article was written by an industry contributor and does not necessarily reflect the position or opinions of the Professional Beauty Association (PBA). To submit a request to contribute an article, click here.