Monday, February 2, 2009

Michigan Appellate Court Upholds 5-Mile Non-Compete Against Hair Stylist (Lockworks v. Keegan)

Non-compete agreements are always judged by the concept of reasonableness, and in most states, whether they protect a legitimate business interest. Frequently, the scope of protectable interests focuses on business-to-business, rather than consumer, services. Indeed, non-competes can be enforced in the retail context, protecting employers engaged in so-called Main Street.

A case-in-point involves hair stylists. Non-competes are more common for hair stylists than one might think, and the case law suggests that because of the inherently personal nature of the services provided by a hair stylist to a customer, there is no question that a covenant not to compete can protect a legitimate business interest of the salon.

In Lockworks, Ltd. v. Keegan, the Court of Appeals of Michigan recognized this and enforced a 1-year, 5-mile non-compete against a hair stylist. With personal services businesses, the geographic scope of a non-compete often takes paramount importance in the analysis. Simply put, consumers will not travel great lengths to receive certain services - whether it be personal training, veterinary care, or in this case, hair cuts.

Here, the trial court committed reversible error when it determined that Keegan's new competitive job did not violate the non-compete, even though she went to work for a salon 4.16 miles from her old position with the plaintiff. In essence, the trial court blue-penciled the contract to find Keegan not in breach, determining that just over 4 miles was enough of a distance to protect the plaintiff. According to the appellate court, this was improper. Because 5 miles was a "modest distance", the customers with whom Keegan developed a relationship would not be deterred from driving the extra mileage to see her.

Accordingly, the court reversed and remanded for a determination of damages. Because the non-compete expired, the issue of an injunction appeared to be moot.


Court: Court of Appeals of Michigan
Opinion Date: 1/27/09
Cite: Lockworks, Ltd. v. Keegan, 2009 Mich. App. LEXIS 157 (Mich. Ct. App. Jan. 27, 2009)
Favors: Employer
Law: Michigan

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