This is the second article in a continuing series, “The Restricting Covenant.” In this article, I discuss a topic that is near and dear to me – my hair and my long-time relationship with my barber. I have used the same barber to cut my hair since high school, even after moving many miles away. I sit in his chair, he cuts my hair with expert precision, and I am a satisfied customer. This got me to think about one of the most basic reasons why employers want to impose non-compete and non-solicitation obligations on their employees – the value and strength of a long-term customer relationship. Courts have long recognized that protecting customer relationships is a legitimate protectable business interest that can support the enforcement of a restrictive covenant if it satisfies standards of “reasonableness.” So if my barber was to leave his current location, could his employer enforce a post-employment covenant that would prohibit him from cutting my hair? Yikes!
The Art of Barbering
The barber’s trade has a long history, dating back to Ancient Egypt. Many states require a barber to have a license in order to practice barbering professionally. There are quite a few cases throughout the country that discuss the enforceability of restrictive covenants in the context of barbers, barbershops, hair stylists, hair, nail and beauty salons, and beauty shops. Many of these decisions involve the sale of an entire business, not just the transition of one employee to a competitor. Courts generally tend to be more willing to enforce broader restrictions in the sale of a business context.
One interesting case in my home state of New Jersey that involves barbers and non-competes is Dellacorte v. Gentile, 98 N.J. Eq. 194 (1925). The plaintiff-barber Victor Dellacorte obtained a preliminary injunction to stop the defendant-barber Jean Gentile from directly competing against him in Summit, New Jersey.
In 1922, Gentile sold his barbershop, including “fixtures and goodwill,” to Paula Tally for $2,500. The bill of sale had the following non-compete:
The party . . . agrees that he will not, directly or indirectly, either as employer or employee, engage in any branch of the barber business within a radius of one mile from No. 13 Maple Street, Summit, New Jersey, for a period of five years from the date hereof.
As discussed below, the key phrase was “any branch of the barber business.” Thereafter, Tally sold the business, including the non-compete, to Dellacorte.
A few years later (during the restricted period), Gentile opened a “beauty parlor” about 250 feet (in the restricted territory) from Dellacorte’s (formerly Gentile’s) barbershop. Gentile argued that his new shop did not compete with Dellacorte because it “cut and bobbed ladies and children’s hair,” and was “in no sense a branch of the barber business.” To bolster this argument, Gentile’s attorney cited the Latin root of the word “barber” (“barba,” meaning “beard”), and provided the court with “opinions of the courts in some of the Western states, to the effect that a beauty shop is not a barbershop, and that hair bobbing is not barbering.” The court was not persuaded.
Barber’s Hair Bobbing Activities Cut it Too Close to His Competitor
After examining several different authorities, including the Standard Dictionary’s definition of “barber,” the judge found that “the bobbing of ladies’ hair is a distinct and important part of the business of a modern barber shop, as much as, or more than, was cupping a branch of that business in ancient times.” The judge observed that it was “not uncommon today to see members of the female sex occupying chairs in barber shops having their hair bobbed in an effort to keep pace with the ever-changing styles.” The judge then discussed “Samson and Delilah” and the “Holy Writ,” but I will leave those portions of the court’s opinion for you to read yourself.
The court focused on Gentile’s activities before he sold his business. Gentile’s barbershop had engaged in the bobbing of women’s hair for several years before he sold his business. Accordingly, this line of work “must have been in the minds of the parties when the covenant was entered into.” The court also looked at Gentile’s conduct leading up to the opening of his new competing shop. Gentile had tried unsuccessfully to purchase a release from the covenant, and therefore it was “quite apparent to [the judge] that this defendant went into the new business with his eyes open, and has no right to now complain if the successor of his vendee insists upon compliance with the covenant solemnly entered into.” Based on these facts, the court enjoined Gentile from engaging in any branch of the barber business within the restricted territory pending a final hearing.
Courts Will Look Beyond Labels and Examine Actual Job Functions
Fortunately, for me (and my hair), my barber owns his own barbershop and does not have to worry about non-competes. However, if he were to hire an apprentice, or merge with another barbershop, he would need to consider the pros and cons of having them sign a non-compete or some other form of restrictive covenant. Not only is the Dellacorte decision an interesting case about the history of barbers and barbering, it highlights the searching view that some courts will undertake to determine whether someone should be enjoined from working based on a non-compete agreement. Courts will look behind the “labels” and examine the person’s actual job functions to determine whether a business is truly engaged in unlawful competition. The judge in Dellacorte, for example, did not take Gentile’s representation at face value that “bobbing ladies’ and children’s hair” was not “a branch of the barber business.” Instead, he reviewed extraneous sources regarding the meaning of “barbers.” He also relied on his own experience and observations at barbershops. He looked at the parties’ conduct before and after the sale of the barbershop. Did Dellacorte get the benefit of the bargain on the non-compete? The judge did not think so. Could Gentile earn a living in his trade outside of the restricted territory? The judge thought he could. The balancing of the equities, which is an unpredictable and nebulous concept of “fairness,” favored Dellacorte.
The Dellacorte decision also highlights the critical importance of focusing on the language used in the non-compete itself to determine its scope. For example, if Gentile’s covenant had contained only the words “barber business,” as opposed to “any branch of the barber business,” would the court have stopped him from operating a “beauty parlor”? Would it have been more helpful if Gentile had defined “the barber business” in the bill of sale? While the duration of the restriction and the geographic scope are usually straightforward, the description of the prohibited activity can generate much dispute and litigation. When drafting non-compete agreements, give careful attention to the description of the activity-based restrictions.
The goal of this Series is to provide a brief overview and some interesting insights and practical pointers when dealing with unique issues that might arise in the context of restrictive covenants and a particular occupation or industry. It is not intended to provide and should not be construed as providing legal advice. Each situation is different, and if legal advice is needed, you should seek the services of a qualified attorney who is knowledgeable and experienced in this area of the law to address your specific issues or needs. Stay tuned for future articles in this Series, which will discuss the restrictive covenant landscape for other occupations and industries, including brokers, bankers, broadcasters, and more.