In a decision that applies to tradespeople generally, a court has found a low-paid casual hairdresser’s two-year restraint on poaching clients “void and unenforceable” because it was “significantly longer” than necessary to protect her former employer’s legitimate business interests.

A hairdressing salon sought $85,000 in damages from the hairdresser for breaching a restraint of trade clause in her employment contract.

The clause restrained her from diverting, or attempting to divert, any business the employer had enjoyed, solicited or attempted to solicit from its customers before her employment ended, and for a two year post-employment restraint.

In December 2022, a new owner purchased the business from the hairdresser’s sister and mother and continued to casually employ her for 23.5 hours a week on $31.53 an hour. The hairdresser signed a new employment contract containing the non-compete clause.

In April 2023 the hairdresser resigned and, at the owner’s request, agreed to tell customers that she planned to leave the salon to focus on “health wellness including reiki therapy”.

The South Australian Magistrates Court heard that hairdressing salons often tell clients that employees are leaving to pursue other career opportunities to avoid losing them as customers.

The day after she left, the hairdresser began renting a chair at another salon, and working as a sole trader.

The employer alleged that the hairdresser attempted to solicit its customers, in breach of the restraint clause, when she made two Facebook posts promoting her new business “Hair by Ash”.

In a post on her personal page, she announced that she had left her old employer to open her own business and linked to her ‘Hair by Ash’ business page. She made a second post on her business page, where she said she had a “wonderful first week” and she thanked all her “wonderful clients who have stayed” with her.

The employer told the court that a significant number of its repeat customers cancelled their continuing appointments and moved their business to Hair by Ash, causing it to lose future earnings.

The owner of the business said that as part of the business sale she bought “goodwill” that “was largely comprised of the existing … customer base”.

The Court found that the employer had a legitimate interest in restraining the hairdresser to protect the customer connections it acquired in the sale of the business.

The Court noted that the previous employer had employed the hairdresser for 12 years before the sale, and she had developed a personal rapport and close connection with the lucrative ‘big colour clients’ who usually returned every month or so and made advance bookings.

As to whether the restraint clause’s extent and duration “was reasonably necessary” to protect the employer’s legitimate business interest, the magistrate stated that its “breadth and lack of clarity” differed to the commonly-used language in non-solicitation clauses.

The Court found a reasonable person would have understood that the clause meant the hairdresser agreed not to engage in any activity for two years after leaving the employer “that caused or may cause” a customer of the employer “to go elsewhere for hairdressing services”.

“The activity did not require a positive step of encouragement to breach the restraint clause,” the Court ruled. “(C)ustomers” referred to any person that purchased hairdressing services from Changing Looks after the sale, “even if only on a single occasion”.

Two years was “significantly longer than what was reasonably necessary to protect the legitimate interests” of the employer.

“The customer base of the Changing Looks business at the time [of the sale] largely comprised of long-standing repeat customers many of whom booked appointments into the future to secure the availability of a particular hairdresser or service, such as colour, every four to six weeks”, she said.

The magistrate noted that customers might book in with more than one hairdresser for different services within a single visit, or book with a different hairdresser if their regular worker had been booked up.

“A hairdresser would usually be able to establish a connection with a ‘new’ customer, if not on the first appointment, by the second appointment.

“In my view, these key aspects of the patterns of customer behaviour suggest that the repeat customer base were exposed to more than [the hairdresser] in the usual course and that ordinarily a close connection could be formed by another hairdresser by the second appointment at the latest.”

She also took into account the hairdresser’s low pay and casual employment status.

The Court dismissed the employer’s damages claim.

Lessons for employers

An employer has to give serious consideration to protecting their interests should an employee leave and take customers with them. A properly drafted legally enforceable clause is essential. The time restraining an employee needs to be carefully considered and will generally be the time to sever an employee’s connection with customers. Two years is too long and will fail in any court.