RESTRAINT OF TRADE - WHAT BUSINESS OWNERS & EMPLOYERS NEED TO KNOW WITHIN THE HAIRDRESSING, COSMETOLOGY, BEAUTY & SKINCARE INDUSTRY

Written by Melissa Eales

Running a salon/spa is about far more than styling hair or delivering beauty treatments. Salon/spa owners invest heavily in training staff, building client relationships, developing pricing structures, and maintaining a particular brand experience. Restraint of trade clauses are one way to protect those investments when a stylist, therapist, or manager leaves and joins or starts a competing salon.

In South African legislation, restraint of trade clauses are generally enforceable, but only if they are reasonable and serve to protect legitimate business interests. The law balances two important principles: that valid agreements should ordinarily be honoured, and that everyone has a constitutional right to choose their trade, occupation, or profession. This balance is especially important in the salon industry, where personal client relationships and word-of-mouth marketing are central to success.

What Is a Restraint of Trade in a Salon/Spa Context?

In the salon environment, a restraint of trade is a clause in an employment contract, shareholders' agreement, partnership agreement, or sale of business agreement that limits what a hairdresser, therapist, manager, or former owner may do after leaving. Typical provisions could:

• Prevent a hairdresser or therapist from working at a competing salon within a certain radius for a set period.

• Stop former staff from opening a competing salon in the same area.

• Restrict ex-employees from soliciting or poaching clients.

• Prohibit ex-staff from recruiting remaining employees to move with them.

• Prevent the use of price lists, treatment menus, marketing plans, or client databases for a competing business.

The purpose of these clauses is not simply to stop competition. The law does not protect a business from ordinary, fair competition. The aim is to protect specific interests that truly belong to the salon, such as confidential information, client connections, and the goodwill built up over time.

Legal Framework

South African courts have held that restraints of trade are enforceable unless they are shown to be unreasonable or contrary to public policy. The leading authority is Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A), which confirmed that parties are generally bound by their agreements unless there is a strong reason not to enforce them.

In Basson v Chilwan and Others 1993 (3) SA 742 (A), the court set out the test used to decide whether a restraint is reasonable. That test has been applied in many later cases involving employers and employees, including service businesses built on repeat custom.

A more recent example is Trendy Greenies (Pty) Ltd t/a Sorbet George v De Bruyn and Others (C 390/2020) ZALCCT 3 (17 May 2021). That case shows how courts look at the realities of the salon business, including client relationships, brand identity, and the local market, when deciding whether to enforce a restraint.

What Interests Can a Salon/Spa Protect?

A restraint of trade will only be enforced if it protects a legitimate proprietary interest. In the salon industry, that usually includes confidential information, client relationships, and goodwill.

Confidential information and trade secrets

This may include:

• Client records, such as treatments, colour formulas, allergies, and preferences.

• Pricing structures, discounts, and package deals.

• Business plans, marketing strategies, and social media campaigns.

• Supplier terms, special product deals, and commission structures.

• Internal training materials, methods, and standard operating procedures.

If the information is not public and gives the salon a competitive advantage, it may be protected by a restraint.

Client relationships and trade connections

Clients often follow a stylist or therapist with whom they have built trust. Where an employee has strong client relationships and is able to influence clients to move with them, those connections may be protected.

Goodwill and brand reputation

If a salon/spa is purchased as a going concern, or operates under a franchise brand, goodwill may form a substantial part of the value acquired. Restraints are often used in sale-of-business and franchise agreements to stop the seller or former franchisee from quickly opening a rival salon nearby and undermining that goodwill.

What Is Not Protectable?

Courts distinguish between a salon's proprietary interests and the personal skills of its staff. A salon/spa owner cannot "own" a stylist's or therapist's general skills, experience, or professional qualifications.

Employees are entitled to earn a living using their own abilities. A restraint that effectively excludes them from the industry altogether, without a clear link to protecting confidential information, client connections, or goodwill, is unlikely to be enforced.

How Courts Assess Reasonableness

The Basson v Chilwan test asks, in essence:

• Does the salon/spa have a protectable interest, such as confidential information, client relationships, or goodwill?

• Is that interest threatened by what the former employee wants to do?

• Does the salon's/spa's interest outweigh the employee's right to work and earn a living?

• Is there any public policy reason why the restraint should or should not be enforced?

Key Factors for Salon/Spa Owners

When a court considers a restraint in the salon context, it usually focuses on three practical issues:

1. Duration

A restraint lasting six to twelve months may be more defensible for a stylist or therapist with close client contact. Longer periods may be justified in a sale-of-business or franchise context, where goodwill and brand value are transferred. Very long restraints, without proper justification, are vulnerable to challenge.

2. Geographical area

The area should match the salon's actual market. For a local salon, that may be a radius of 5 to 20 km, depending on where clients usually come from. A clause preventing a stylist from working anywhere in South Africa will usually be too broad for an ordinary employee.

In Trendy Greenies, the court considered the area from which the salon actually drew its business when assessing relief.

3. Scope of activities

A clause that simply states that a former employee may not work in the beauty industry anywhere is far more vulnerable than one that restricts work for a direct competitor within a defined area. The restraint should be limited to activities that truly threaten the salon's/spa's interests, such as providing similar services to the same market using confidential information.

Salon/Spa-Specific Examples:

Senior stylist with a loyal client base

A senior stylist with access to the client database resigns and plans to open a salon nearby offering similar services. A twelve-month restraint within a reasonable radius, together with a non-solicitation clause, may be viewed favourably if the contract clearly identifies the interests being protected.

Junior shampoo assistant

A junior employee who washes hair, prepares stations, and has no access to pricing structures or client records is restrained for three years from working in any salon in the province. That restraint is likely to be excessive because there is no real protectable interest linked to that employee.

Sale of a salon

A buyer acquires an established Cape Town salon together with its brand and client base. The seller agrees not to open a competing salon in Cape Town or the surrounding areas for three years. Because the buyer has paid for the goodwill and client relationships, that restraint is more likely to be enforced, provided the area and period are justified.

Enforcing a Restraint

If a stylist or therapist leaves and you believe the restraint is being breached, action should usually be taken quickly. Restraint disputes are often brought urgently, with a request for an interdict preventing the former employee from:

• Working at a competing salon in breach of the restraint.

• Soliciting or accepting business from clients they serviced while employed.

• Using confidential information, including the client database.

To succeed, the salon/spa will generally need to show:

• A valid, signed restraint clause.

• A legitimate proprietary interest.

• Conduct, or threatened conduct, that breaches the restraint.

• That enforcement is reasonable in the circumstances.

Courts may grant targeted relief that fits the actual risk, rather than enforcing every part of a clause automatically. A court may also limit the restraint if necessary, depending on the facts and the wording of the agreement.

How Employees May Challenge a Restraint

The employee usually bears the burden of showing that the restraint is unreasonable. Common arguments include:

• The salon/spa has no real protectable interest in relation to that employee.

• The geographic area is much wider than the salon's actual market.

• The duration is longer than needed to protect client relationships.

• The employee had limited or no access to confidential information.

• Enforcement would effectively prevent the employee from earning a living.

A court will weigh those arguments against the salon's evidence of risk. This is why careful drafting and proper record-keeping are so important.

Practical Tips for Salon/Spa Owners

When using restraint clauses in employment contracts, salon owners should:

1. Clearly identify what is being protected, such as client lists, confidential formulas, marketing plans, pricing structures, and goodwill.

2. Match the radius to the salon's real market.

3. Use realistic periods that protect the business without becoming punitive.

4. Align restraint clauses with confidentiality and non-solicitation provisions.

5. Apply different levels of restraint to different roles.

6. Review restraints when employees are promoted or their duties change.

Overbroad, one-size-fits-all restraints are more likely to fail. Carefully tailored clauses, supported by evidence of what is being protected, have a much better chance of being enforced.

For salon/spa owners, restraint of trade clauses remain an important tool for protecting confidential information, client connections, and goodwill in a highly competitive, relationship-driven industry. When drafted carefully and used responsibly, they can provide real protection without unfairly preventing former staff from earning a living.