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These formulas are mine (or are they?)

May 30, 2014

ImageIn the beauty industry the question of who “owns” the client (their file and business) frequently arises. At the heart of this battle are the fabled formula cards that, for the vast majority of businesses, are located on file cards in the colourist’s possession (helping to uphold the belief that the formulas are the colourist’s property). To further muddy the waters of this debate there are many different ways in which to employ salon/spa personnel including independent status, commissions and bonus structure, team based pay, booth and chair rental, contract workers, regular employees and freelance artists.

So who does the client belong to? No matter where you operate your business in Canada, the labour laws are pretty specific about one thing; the subordination link. In order to distinguish between an independent worker and an employee a labour dispute court would first want to determine what kind of subordination the worker is submitted to.

Simply put, who has the decision making power on working hours, products, prices, pay, education, quality and other aspects of running the business. In reality there is no independent status in the salon industry unless you are a booth/chair rental. All other forms of  employment are variations of the standard employer/employee relationship with all the legal, financial and fiscal ramifications that go with it.

This means that, with the exception of chair rentals, the salon is obliged to collect all relevant taxes and other deductions from the employee paycheck and must pay the employer portion for all employees. The only exception to this rule is in Québec where the employer is required to take care of unemployment payments for chair rentals as well. Understanding this, it becomes clear who owns the client files; clients belong to the business unless an employee came in with a proprietary client base and uploaded that client list into the salon database. As an employee, any work produced during your employment belongs exclusively to the employer. Employees were paid fair and square to perform their work and consequently all colour formulations are the sole property of the salon. Whatever is produced or documented e.g. formulas, education material, salon policies or any tools or processes created during the employment period belong to the person who paid for it. Copying formulas or client cards is not only a breach of contract but in most cases is illegal.Image

So what happens when an employee decides to work for a competitor across the street, or worse, opens his/her own salon around the corner?  Well, the rule above still applies; the client files belong to the salon unless the staff member was a chair rental independent. This however does not restrict anyone from going after your clientele unless there is an employment contract with a non-compete and a non-solicitation clause that clearly stipulates a reasonable distance and duration of the limitation as well as a reasonable penalty for breach of contract. Understand that you can’t stop someone from working everywhere and that, depending on the population density of your geographical area, the restriction usually ranges from 2 to 5 kms, rarely between 5 and 10 kms, and never beyond 10. It is possible to enforce a non-solicitation clause for both clientele and other employees, but it requires a fair amount of time, money and resolve. If an ex-employee is pilfering staff or clients, immediately send a lawyer’s letter warning the ex-employee to cease their unauthorized practices or face the stipulated penalty.

To avoid disputes of this nature, salon/spa owners should modernize their systems and end the use of formula file cards entirely, entering client formulas directly into their salon software. Not only will this prevent theft but it may also allow you to better manage your colour inventory and ensure proper charges for colour services.

 

This article was first published in the May 2014 edition of Canadian Hairdresser Magazine page 28 and 29

http://viewer.zmags.com/publication/398512e3#/398512e3/28

 

 

 

 

 

 

 

 

 

 

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