Hairstylists tangled in salon debate as FTC weighs rules change
Jamie Noblit was 18 years old, fresh out of school and pumped about starting a career as a stylist at a big-name salon when she was asked to sign an agreement as a condition of employment.
She would come to regret not paying more attention to what she was signing.
Now, the Federal Trade Commission is proposing to ban noncompete agreements like the one Ms. Noblit signed to work at the Philip Pelusi Salon in Cranberry in 2002. The contracts restrict where employees can work after quitting a job and are used by businesses in a wide variety of professions, from surgeons, to graphic designers, to software engineers.
The U.S. Chamber of Commerce calls the contracts “an important tool in fostering innovation.” Employers
like Philip Pelusi argue that noncompetes are needed to protect trade secrets, investments in training employees and client loyalty.
Critics, including the FTC, say the agreements hobble economic and career growth, costing nearly $300 billion in wage increases annually if people could leave for better paying jobs and limiting job opportunities for some 30 million Americans.
The FTC will accept public comment on banning the agreements until March 20. A preliminary finding by the FTC determined that noncompetes stifle competition and therefore violate the Federal Trade Commission Act.
“The proposed rule would ensure that employers can’t exploit their outsized bargaining power to limit workers’ opportunities and stifle competition,” Elizabeth Wilkins, director of the Office of
Policy Planning at the FTC, said in a prepared statement.
In few places is the long reach of noncompete agreements more apparent than among Pittsburgharea hairstylists, many of whom change jobs to make more money. That was Ms. Noblit’s reason.
“It’s not good to move around as a stylist, but sometimes you have to try,” said Ms. Noblit, 39, who then lived in Butler. “I was making an hourly wage. I knew I could make better money at a commission salon and have better control of my appointment book.”
Ms. Noblit quit the Cranberry salon and went to work at Above All Grand Salon & Spa in Pine in 2005, prompting a five-count lawsuit against her and her new employer by Philip Pelusi. Also named in the lawsuit was fellow stylist Deanna Flint, who left the Philip Pelusi shop for Above All Grand about the same time.
“In order to both promote and protect the brand in a highly competitive industry,” Philip Pelusi’s attorney Elly Heller-Toig wrote in a motion to enforce a settlement agreement in the case in 2006, “Pelusi expends substantial time and resources in order to deliver
and maintain both its employees and its customer base.”
Philip Pelusi opened its first salon in 1965 and had a “trademarked haircutting technique and extensive training program for Pelusi designers” by 1976, according to the lawsuit.
Ms. Heller-Toig, who is with the Downtown law firm of Marcus & Shapira LLP and has represented Philip Pelusi in dozens of similar lawsuits against former stylists, did not respond to a request for comment.
“Noncompetes are common in the hairstyling industry,” said Jonathan K. Cohn, partner, at the Downtown law offices of Stember Cohn & Davidson-Welling LLC. “You don’t necessarily go to a salon, you go to the stylist. And the owner is fearful you’ll walk off with their customers.”
The Pine salon where Ms. Noblit and Ms. Flint went to work was less than seven air miles from the Philip Pelusi store in Cranberry, violating their employment agreements, according to the lawsuit. Ms. Noblit said she thought the restriction was five miles.
“I was a young kid, I didn’t know to initial every page,” she said about the agreement she signed. “I thought I was abiding by the contract when I quit. I was trying to make more money totry to get on my feet.”
ShellyKern, an employee at the Hair Force Salon in Elizabeth Borough, said such agreements can be too restrictive.
“It’s not right to take someone’s livelihood,” said Ms. Kern, a hair stylist for 43 years.
Salon owner Suzan Warchola, who was sued in 2015 for hiring a hairdresser whose employment was restricted by a Philip Pelusi contract, said she understands why owners want to protect their investment.
But she worries the restrictions can go too far.
“This is the United States, a free country,” Ms. Warchola said. “If someone quits — it happens all the time. I’m just a small business owner. If you’re not happy here, I really don’t want you here.”
Back in Pine, settling the lawsuit against Ms. Noblit wound up costing her nearly $4,000 in legal fees, she said.
“Youth and inexperience is not a legal defense,” Mr. Cohn said. “Noncompetes are enforced out of fear rather than the courts. When you get threatened to get sued and you’re making $15 or $20 an hour, it can be very scary.”
Noncompete agreements are outlawed in California, North Dakota, Oklahoma and Washington, D.C.; the Pennsylvania House and Senate introduced bills last year that would’ve restricted their use. The bills died in committee. Oregon, Nevada and Virginia have limited bans on the contracts.
Among the critics of a proposed FTC ban is the U.S. Chamber of Commerce, which called them “an important tool in fostering innovation.”
“Attempting to ban noncompete clauses in all employment circumstances overturns well established state laws, which have long governed their use and ignores the fact that, when appropriately used, noncompete agreements are an important tool in fostering innovation and preserving competition,” Sean Heather, senior vice president for International Regulatory Affairs and Antitrust, wrote in a public statement Jan. 5.
Ms. Noblit is not convinced.
“I’d never make someone sign one and I’d never sign one again in my life,” she said.