Monday, May 23, 2011

Hair Stylists Subject to Enforceable Non-Compete Agreement (Jon Scott Salon v. Garcia)

Clients mistakenly believe that non-competes are limited to a narrow range of "sophisticated" industries. In fact, non-compete agreements are common in a wide range of disciplines, from so-called professions (accounting services) to business-to-business relationships (wholesale insurance brokerage) to retail services (personal training).

I presented at a seminar a few weeks back, and a judge remarked to me that his experience with non-compete cases "usually involved hair stylists." Though he was joking, it's not unheard of to see such cases. Stylists develop a personal connection with their clients and provide a service that is hard to replicate. Many personal services providers have sales employees or technicians who develop intimate relationships with clients and who get to know their clients very well. It is this kind of interest a business can protect legitimately through a non-compete agreement.

Employers ought to consider using the least restrictive means possible to prevent competition by personal services providers. A customer non-solicitation agreement for a hair stylist, for instance, would narrowly match the restriction with the protected interest. A stylist presents a risk only if she takes her clients. She is unlikely, for instance, to develop some proprietary program or process that has independent value.

Don't be surprised, though, when courts misapply the law if the non-compete defendant is a retail service provider like a stylist. A lot of judges who don't hear but a few non-compete disputes a year think covenants should be limited to a narrow set of circumstances - the high-paid CEO, the rainmaking insurance producer, or the partner at an accounting firm. A recent Texas judge misapplied the law and dismissed a proceeding against a stylist, holding that because she was an "at-will" employee, she could not be restrained by a non-compete at all.

This was a ruling that was contrary to existing precedent. The mistake may have been made due to courts' hostility to non-compete agreements, particularly as to employees who line Main St. USA. Non-compete litigation always has a cost; mistakes made by courts are one of those costs that are hard to predict.


Court: Court of Appeals of Texas, Fifth District
Opinion Date: 5/19/11
Cite: Jon Scott Salon, Inc. v. Garcia, 2011 Tex. App. LEXIS 3790 (Tex. Ct. App. May 19, 2011)
Favors: Employer
Law: Texas

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