There are a few realities associated with Non-Compete Agreements in general, and for cosmetology professionals in particular:
1. Stylists are NOT lawyers (and vice-versa, thank goodness).
2. Many stylists are a bit intimidated by legal issues, such as Non-Compete Agreements.
3. Salon owners KNOW THIS and use it to their advantage.
4. ALMOST ALL NON-COMPETE AGREEMENTS ARE UNENFORCEABLE (INVALID).
As a leading provider of upscale salon suites facilities, we have seen it many times: a stylists wants to strike out on her own, make her own way, build her own business, finally make some REAL money, and take control of her own career. But she feels she can't because she signed a pesky Non-Compete Agreement (sometimes known as a Covenant Not To Compete) with her current employer, which says something like she can't leave and work as a stylist, usually within a certain distance from the current salon. So she is intimidated into staying, resigned to limiting her income and independence, fearful of her salon owner "coming after " and suing her if she leaves. Understandably, this strikes more than a little fear into the hearts of most people.
Many salon owners know this and understand the power of intimidation, particularly on someone without the legal background and/or resources to understand that almost ALL Non-Compete Agreements are unenforceable (illegal). That's right, the Non-Compete Agreement that the stylists signed at her current salon is probably not worth the paper it's printed on, and the courts have consistently rendered most similar agreements invalid.
Here's the deal (A Texas example, but most states are similar)-
A few years ago, the Texas legislature passed the Covenants Not To Compete Act, and any Non-Competition Agreement in the State of Texas must adhere to its provisions. Among other things, a Non-Compete Agreement must have several elements to make it valid: protect a legitimate business interest, have reasonable limitations as to the scope of activity to be restrained, have reasonable geographic and durational limitations, and (most importantly) be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. Again, this example is specific to Texas, but check your state. Most are governed by similar statutes. So, what does it mean?
A Non-Compete will typically say that if the stylist leaves the salon's employ, she can't work within a certain radius of the salon's location (usually 10 miles) doing the same kind of work done for the salon (cosmetology work), for a certain period of time (1 to 2 years). OK, pretty straight-forward so far, but the important part comes along in that last clause, "ancillary to or part of an otherwise enforceable agreement". What does that mean?
Like many states, Texas is known as a "right to work" state, which essentially means that employment is "at will" (basically, the employee can leave any time, and can be terminated at any time). This is important because the Texas Supreme Court has held that an "at-will" employment relationship is not an otherwise enforceable agreement since it can be terminated at any time by either party. For this reason (here's the important part), a Non-Competition Agreement that is ancillary only to an "at-will" employment agreement is invalid, no matter how reasonable in scope on the other issues.
In simple terms, that means that a Non-Compete Agreement that does not include other "independent consideration" (i.e. bonuses [and commissions are NOT bonuses], ownership in the salon, disclosure of confidential or proprietary information, etc.) , it is unenforceable, or not valid, no matter how reasonable the other provisions of the agreement may be.
We have seen many Non-Compete Agreements, and have yet to find one that adheres to these requirements, which makes them legally invalid. Our experience has been that some salon owners are aware of this and others aren't, but that almost all use these agreements to intimidate stylists with no legal training and few financial resources to fight them. The stylists knowing and understanding her rights and a little law can free her to pursue her career the way SHE wants, preferably in your salon suites facility.
For the salon suites operator, this is a huge issue. As operators ourselves, we will even offer to indemnify the stylist from potential legal fees, and defend them if required, if their current salon decides to pursue any action. We do this because we're confident we have no exposure. In our experience, we have never had a salon owner actually pursue a stylist, are unaware of any client of ours experiencing this, and have ever even heard of it happening. Most salon owners are not very legally sophisticated themselves, and will not deem it to be worth the hassle to pursue the stylist, especially when considering the futility and expense.
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