Losing a stylist at your salon doesn’t just mean you’ll have to adjust scheduling and start the search for a new hair guru. It could also mean the stylist who quit or was terminated moves to the salon down the street — or opens her own business — bringing her clients along with her and issuing a severe hit to your enterprise.
Non-compete agreements between you as a salon owner and your stylist employees protect your business from losing trade secrets and valuable customers.
According to corporate attorney Joshua Reilly, based in Phoenix, a non-compete agreement is agreed upon and signed when a stylist is hired and is implemented immediately upon working. “As a small business owner, your customer list is your most important asset,” says Reilly. “A few hundred dollars for an attorney’s advice on a properly crafted employment and non-compete agreement can save you thousands in possibly lost lifetime customers.” Here is what to know about how non-compete agreements work within the salon industry and how to execute one that protects your business.
Check Your State Laws
Every state has different regulations in terms of what you can achieve with a non-compete agreement. Some states, like California, don’t even allow non-compete agreements save for certain circumstances. Consult an employment lawyer who can walk you through your state regulations and draft up an agreement that’s legal.
Make Your Agreement Reasonable
If your state does allow you to have a non-compete agreement, you’ll generally be allowed to create one based on geographic location and length of time. This means the agreement will outline how long a stylist must wait before opening a salon or working in a salon near you and how far away they must work during that duration.
You should also include a confidentiality provision in the non-compete agreement that protects your salon from having its proprietary formulas, techniques and information shared. A robust point-of-sale system like QuickBooks Point Of Sale for Salon powered by Revel Systems conducts business performance reporting and collects data about clientele, making it a wealth of information that you should protect. While the Payment Encryption in QuickBooks POS secures all customer payment information from falling into the wrong hands, other customer information collected from mobile payments or point-of-sale devices must be safeguarded from being used by a stylist who leaves.
Because a non-compete can be fought in court (and sometimes dismissed), it’s vital to make the agreement reasonable. Minneapolis-based attorney Mike Gray, partner in Gray Plant Mooty, recommends to Salon Today to limit the non-compete to a year after a stylist has left, and depending on the density of the area and how many salons are nearby, limit the mileage. For example, forbidding the stylist to practice within 10 miles of your salon in a saturated area like Manhattan may be deemed as greedy by a judge should the stylist bring the case to court. In a rural area or one that is sparsely populated, longer distances may make more sense.
Any time limit that exceeds two years will probably be deemed as excessive. What counts as competition should also be thoroughly explained in the agreement and should also be directly related to your business to be viewed as reasonable.
Cover Your Bases with Current Employees
If you have employees currently working for you who haven’t signed an agreement, it’s possible to present a new agreement to them in cases such as a promotion or raise.
In the case an employee does express leaving and violates the non-compete agreement by promoting their new location to current clients, contact the lawyer who drafted up the agreement to send a cease and desist letter to the stylist alerting them they’re breaking the agreement. It is also important to contact the new salon, via a lawyer, to alert them to the non-compete agreement, as well.
If the cease and desist letter doesn’t stop your stylist and the other salon from proceeding, your lawyer may ask for an injunction from the court system and a temporary restraining order from violating the non-compete.
Respect Other Non-Competes
In the world of salon karma, you might encounter an interviewee who is violating another salon’s non-compete agreement by applying to work at your salon. Inquiring during the interview if they’ve signed a non-compete with another salon prevents you from getting involved in sticky legal issues should you hire the stylist.
When you consider the potential cost of having multiple employees leave your salon and take your knowledge and their clients with them, it’s best to prepare early and establish the foundation for relationships built on respect and trust. A non-compete agreement that is legally grounded and fair ensures your salon is protected whether employees leave voluntarily or are terminated.