Overview of Salon Employee Agreements
A salon employee agreement is a contract between a salon owner and each employee who works in the establishment. This agreement provides a written documentation of the understanding between the employer and employee. It also gives the employee specific information about their rights in the workplace, pay, benefits, responsibilities, and more. It is required for salon owners to have this documentation regardless of how large or small their business is.
Salon employee agreements are in place so everyone is in the know. Being up front about the rules, regulations , and the way you run your business shows employees that you are a straight shooter. You have nothing to hide.
Having a written salon employee agreement also comes in handy if you have to go to court at any time. It can settle a dispute over pay or work hours. A court or labor department will often look to these agreements as evidence of your compliance as an employer.
Salon employee agreements will vary from business to business and industry to industry. Your salon employee agreement should be in compliance with state and federal employment laws.
Key Provisions of Salon Employee Agreements
Here are some of the clauses you should consider including in your employee agreement:
The Job Responsibilities Clause. This is a good way to have a fresh start, so try to list the job responsibilities of the new employee, as a start. Consider whether someone in a management position will outline the duties or whether the new employee will sign an acknowledgment of receipt and understanding of the written employee policies. This may help ensure that new hires understand your expectations.
The Compensation Clause. What will the new hire be compensated? In addition to hourly rates, consider what commission structure, sales quotas or incentive payments should be in place.
The Confidentiality Clause. In addition to an obligation not to divulge trade secrets or confidential information, the agreement may include provisions prohibiting the solicitation of customers. You may wish to address the use of salon names or product lines in advertising or the internet.
The Termination Clause. An important part of every employee agreement, the parties should agree on when notice should be given and whether notice is required if the decision to terminate is made at the end of the day. If more than one party will be signing the agreements, make sure it is clear who will be responsible for any breaches of the agreement. For example, does it matter if the owner changes and the termination clause now rests with the new owner? Should both parties agree that the obligations will transfer to the new business, or is it sufficient to require an update of the agreement?
Legal Issues with Salon Employee Agreements
When creating an employee agreement for a hair, nail, and/or spa salon, it is important to ensure that the agreement complies with all relevant employment laws and industry regulations. Compliance extends not only to general employment law issues, such as exemptions from overtime pay and authorized pay practices, but also to state and local laws and regulations. In addition, the salon may need to comply with specific requirements for the hairstylist training or licensing, and must monitor procedures to ensure compliance. Finally, the terms of the employee handbook, company policies, and other documents that make up the employment relationship must be coordinated with the provisions of the written agreement.
An additional consideration when drafting an employee agreement is ensuring that it accurately reflects the details of the employment relationship. Be sure to include all the necessary terms and conditions of employment and to use precise language to describe the scope and limitations of employment. Agreements should be carefully reviewed to ensure that they are not overly restrictive and that they do not violate applicable laws.
The terms of an employee agreement can have significant implications for an employer’s liability. For example, the agreement could impact whether a hairstylist is an employee or independent contractor for tax purposes, whether he or she is eligible for overtime, and whether he or she is prohibited from performing services at a competitor following termination. For these reasons, employers should consult counsel who are experienced in drafting salon employee agreements.
Mistakes to Avoid
Presented below are the most common mistakes when setting up employee agreements and how to avoid them.
Mistake #1 – Failing to address religious and health-based accommodations. Many employees for a variety of reasons, oftentimes health-related or religious, may be unable to work on certain days, or at certain times, or in certain locations, or in certain types of tasks. Be sure to address this issue in the employee agreement.
Mistake #2 – Failing to address late and no-show policies. If you do not put this policy in place, it does not exist. And the failure to have a properly drafted policy in place can cost you dearly from a legal standpoint. You certainly want to reserve the right to terminate or impose some other form of discipline for excessive tardiness or no-shows , but be careful to do it in a way that complies with the law, and be sure that it is clearly and specifically articulated in the employee agreement.
Mistake #3 — Do not simply parrot the law inside the employee agreement. Yes, your employee agreement should state that it complies with all applicable law, but do not simply cut and paste the law. Commit the specific law to memory, as well as the ramifications of the law, and be sure that you, your management staff, and your employees understand even more importantly than what the employee agreement states on these issues, what the true legal ramifications are of the law. This includes but is not limited to the Family Medical Leave Act, laws against discrimination, laws against sexual and other forms of harassment, and indeed, all employee rights under state and federal law.
Tailoring Agreements to Different Positions
The success of your salon largely depends on the people you employ and the contracts you enter into with those people. When it comes to employing stylists, receptionists, management, colorists, nail technicians, estheticians, and other service providers, a one-size-fits-all approach will not work. Different roles bring different business needs that require different approaches in drafting agreements. It is important to look at each position both individually, and in relation to other positions, to make sure you have the right people in the right contracts.
For example, having all new stylists enter into the same employment agreement may make sense from a "setting universal ground rules" standpoint, but will likely raise issues when your most talented stylist accepts a job at a competitor, and you try to stop her based on an agreement that was largely designed to protect your lower paid, less talented employees. If a receptionist who also performs hair services leaves, it is unlikely that your current or former clients will even notice—and you cannot breach the confidentiality of your client list to prevent her from taking those clients with her.
Conversely, if you are employing several or many of the same role, a one-size-fits-all approach may benefit your salon by achieving economies of scale and providing you with certainty and consistency—but make sure that the fundamental ground rules are still being made with an accurate understanding of the actual business needs you are facing.
Some common issues that arise in the drafting of these agreements—and how you can help avoid them—include:
Enforcement and Dispute Resolution
While predicting the occurrence of a dispute is always impossible, framing the dispute in advance can make the difference in resolving it quickly, efficiently and cost-effectively. The application of strategic drafting principles to salon employee agreements is a start, but resolving disputes in advance is also important.
Before discussing enforcement, it’s important to point out that enforcing salon employee agreements can be a challenge. Documented employment practices such as those discussed above will reduce the likelihood of misunderstandings and disputes, but properly drafted documents and good employment practices cannot always prevent litigation.
With respect to enforcement, when a dispute arises the salon owner is in the best position to negotiate an early, amicable resolution. If that is not possible or practical, then a salon owner must decide whether to litigate the claim in court or arbitrate.
If the employee refuses to submit to arbitration (or has already sued, thereby precluding arbitration), then a motion to compel arbitration should be filed in court and the court will determine whether the facts of the case fasten it to any exceptions in the agreement. Even if arbitration is granted, the parties usually end up in court anyway (at least for a short time) because it is customary for motions to compel arbitration and subsequently confirm awards to be decided by a judge .
On the other hand, if arbitration is agreed to, or the employee submits to arbitration, the resolution of documented employment practices and other non-compete and trade secret issues are determined by the arbitrator. Other issues such as harassment and discrimination claims made by employees are probably not suitable for resolution in court and likely should be arbitrated.
The procedures available in arbitration are more flexible than those attainable in court. And because each party bears its own costs and expenses (in the absence of bad faith), each party will want to keep costs down so that at the end of the day both parties have been treated fairly and each has prevailed (at least nominally) on the claims made. This being the case, each party is more likely to agree to engage in mediation before arbitration.
The parties can mediate before or after engaging in arbitration or litigation. Mediation can occur with or without a court order or before an arbitrator, but over all, mediation is a process by which an independent third party meets with the parties (and their counsel, if any) for purposes of determining whether a settlement or resolution can be reached. The mediator generally will not decide the issues of the dispute (though some do), but will encourage and facilitate a discussion that suggests ways in which a reasonable compromise might be reached. If successful, mediation usually results in an agreement that is reducing to writing. If successful, outcome of arbitration or litigation is avoided and the parties avoid the expense, time and effort that would have been wasted.