Industry • Best Practice
Why It's Time to Stop Using Non-Compete Clauses for Self-Care Businesses
Jun.08,2023By Boulevard Staff
Non-compete clauses are rapidly becoming obsolete — learn how your business can evolve so it won’t even need them in the first place
When people think of non-compete clauses, they usually think of contracts that prevent specialized tech workers or highly-paid executives from being scooped up by rival companies. Unfortunately, the reality of the situation is far more mundane — at least one in five U.S. workers — many of them making less than $40,000 a year — are subject to non-compete clauses, and their use in the self-care industry is shockingly common. Non-competes prevent stylists from developing their skills and earning better pay, and far too often, lead self-care professionals to leave the industry for good.
We at Boulevard stand firmly against non-compete clauses and believe stylists should be able to move freely to the jobs that give them the best opportunities to advance their careers. If you’re using non-competes in your hiring process, you should drop them as soon as possible — here’s why.
Why non-competes are harmful to the self-care industry
Non-compete clauses are legal agreements employees sign at the time of hire that prevent them from leaving the company to work for a competitor, usually for a period of one to two years after departure. Typically, these agreements also prevent employees from disclosing trade secrets, business contacts, or other information to their new employer.
Now, these agreements can make sense, depending on the industry — for example, a company like Apple will want to ensure its engineers or executives aren’t jumping ship to work at a competitor, bringing highly-specialized skills and proprietary information along with them. But for lower-wage work like the self-care industry, these agreements breed resentment among staff and depress wages across the board.
No business enjoys having its employees poached, but using a legal bludgeon to deal with the problem — rather than addressing the root causes driving employees to leave in the first place — can cause the opposite of its intended purpose. Non-competes leave unhappy employees feeling trapped in a situation they can’t escape, directly contributing to burnout and toxic workplace culture. If self-care employees aren’t happy with their work environment, they will, at best, do the bare minimum to complete their job (aka “quiet quitting”). At worst, they will bring bad attitudes to the workplace and perform poor-quality work — which, depending on the service or procedure, has the potential to lead to lasting physical harm.
Plus, with unemployment at its lowest point in the last 50 years, workers can be far choosier in their choice of employer. If potential employees hear that your business has instituted a non-compete clause, they will likely steer clear and look for work elsewhere.
Non-competes also don’t necessarily prevent stylists from leaving your business — they just ensure these employees leave the self-care industry for good. If this trend continues, we could see an exodus of current self-care professionals, fewer people who want to become self-care professionals, and an overall lowering of the quality of work performed by those who remain.
Where the non-compete winds are blowing
While non-compete clauses are still legal in many parts of the United States, times are changing — possibly faster than business owners realize.
California is currently leading the way in the charge against non-compete clauses. While many employers in the state may try to include non-compete agreements in the hiring process, they are currently unenforceable under California state law. Businesses that attempt to require the signature of a non-compete clause as part of the terms of employment are also subject to fines of $100 per employee per pay period. This law also applies to out-of-state businesses that hire California residents.
As California goes, so does the rest of the country. Twelve states, including Colorado, Washington, Maine, and Oregon, currently require employees to meet a certain minimum salary threshold before they can be subject to non-compete clauses. Four additional states (Minnesota, Missouri, New Jersey, and Texas) also have proposed laws to implement minimum income requirements on non-competes. Then there’s the Federal Trade Commission, which is proposing a national ban on non-competes, regardless of income.
While there is some resistance to a non-compete ban, trends are pointing in the direction of, at the very least, implementing severe restrictions on their use — so it’s best to start taking steps to remove them from your hiring process now.
How to wean your business off of non-compete clauses
So you want to eliminate non-competes but still want to prevent your best stylists from leaving — now what? Here are a few tips to help your self-care business get to the point where it doesn’t need non-competes in the first place:
Be proactive: Whether federal and state governments do away with non-compete clauses, it’s good to consider nullifying them for your current staff. Consult a lawyer before making any changes to your hiring documentation, but starting the transition now will give you a headstart if and when legislative changes arrive.
Consider alternatives: If you’re genuinely concerned about losing out on clients or trade secrets, consider implementing non-solicitation and non-disclosure agreements instead. These clauses give employees the freedom to find employment elsewhere while still offering some protection against poached clients or the loss of intellectual property. Also, consider adding pro-employee exemptions to these agreements, such as allowing stylists to retain clients they might have brought when they were first hired. The goal is to create a mutual agreement where the business and employee can meet each other halfway, not build unnecessary friction into the hiring process.
Provide career development: Employees leave their jobs for many reasons, and according to the U.S. Chamber of Commerce, a lack of opportunity for advancement is near the top of the list. Providing training and skill development sessions, career development, and opportunities for promotion within the organization will foster a culture of learning and growth and further compel employees to stick with you for the long haul.
Open lines of communication: You won’t know what your employees need unless you talk to them and find out for yourself. Schedule all-hands meetings and regular one-on-ones to learn more about what motivates your team, discover the pain points that cause friction during the day, and take on feedback to improve your workplace.
By fostering an open workplace culture and enabling personal growth, you’ll create a solid foundation for a self-care business that retains its brightest employees without the need for restrictive contracts.