Customer Service

She’s Mine. No, She’s Mine! Whose Clients Are They Anyway?

Legally, there’s no question to whom client information belongs, but practically and emotionally, the answers are less clear.

After working in the same salon for more than nine years, hairstylist Nordine Elabassi decided to make his dream of opening his own salon a reality. He began scouting locations and comparing product and quipment lines, and soon confided his plans to the owner of the salon where he worked.He was devastated when he was asked to leave immediately, and even more so when they refused his reguest to take his client information files.

“They wouldn’t give them to me, and after nine-and-a-half years I had to leave without one client,” he remembers. ”So I worked the phone book instead. It took me almost three months, but I was able to gather the information, and my clients.”

Now the owner of a popular 4,000-square-foot salon and spa in Fairfax, Va., Elabassi vows never to make his employees-or their clients-go through what he did. Instead, he promises all employees that when they leave, whatever their reason they can take their client list and contact information with them.

In this, Elabassi is a minority among salon owners: Most jealously guard client information from employees. “It’s always a controversial subject,” observes Ira Bloom, owner of the Nails Now Chain based in Dallas, Texas. “Nail technicians believe that because they have the one-on-one personal contact with clients that they belong to them. But as a salon owner, I disagree.

“Opening a business is risky and expensive,” Bloom continues. “A salon owner markets both the salon and the nail technician, and the cost to do that really adds up. There’s much more to servicing a client than doing good nails. A salon owner is responsible for every thing from running the ads and sending the direct mail pieces that bring the client in to greeting them, making sure the technician is on time, and standing behind her work.

“When we first set out to answer the question of whose clients they are, we assumed there was one, clear-cut answer.” From a legal perspective, that’s right. But as is true about so many things, there are also several shades of gray between the black and white letters of the law.

Letters of the Law

A salon’s clients “belong” to no one but themselves, but their personal information name, address, phone numbers is hot property when it comes to notifying them of new services, promotions, and, for the departing employee, a new location The 80-120 clients of a fully booked nail technician ultimately mean the difference between profit and loss for both the nail technician and the salon owner.If a nail technician leaves and takes her entire clientele with her, the salon suffers financially until that technician is replaced with another who is fully booked, or until replacement builds a full book. On the other hand, a nail technician who leaves a full book behind may need as long as 1-2 years to rebuild her clientele – and her income.      

For these reasons, client information is a perhaps the most valuable asset of a salon, asserts Peter Riebling, an attorney specializing in trade secrets at the Washington, D.C., office of After & Hadden LLP. And,in this case at least, the law sides with the salon owner. While nail technicians may be the ones who have the closest personal relationship with the client, it is the salon that owns the business relationship.

According to Riebling, Client information is protected by as many as three different areas of state laws. The first protection comes from state laws safeguarding trade secrets. Most states have adopted the Uniform Trade Secrets Act of 1979, which protects information that “derives independent economic value from not being generally known by other persons [i.e., a salon’s competitors] who could obtain value from its use.”

“The problem, though, is most businesses fail to take adequate measures to protect those lists, so they adequate measures to protect those lists, so they fall into the public domain,” Riebling adds. ”Common examples of adequate measures to maintain secrecy of customer lists in clued using employee non-disclosure agreements, limiting employee access to the list, marking the list “confidential” and covering the customer list issue in employee hiring and exit interviews.”

 Another avenue that affords some protection to client information is state law governing employee conduct “Under the common law of most states employees and agents have a fiduciary duty to act in the best interests of their employers and principals, and not to engage in self-dealing while on the job,” he explains. Taking client information is a breach of this duty, he notes.

“The third avenue is state law governing contracts. All employees, agents, or consultants should sign non-disclosure agreements acknowledging that client information belongs to the salon. And therein agree not to disclose such information outside the salon. They should further agree not to use such information to compete with the salon.” If an employee who has signed such a contract takes client information with her when she leaves, he adds, he can be liable for breach of contract.

It’s important to note that these laws protect more than the actual client protect more than the actual client cards or computer records. Employees cannot legally records. Employees cannot legally solicit business cards from clients, create their own duplicate set of records form the salon, or copy the salons’s information onto their own paper. ”If you solicit information from the client, it’s being obtained in the scope of your employment,” Riebling says.” To legally obtain the information, you’d have to collect it independently from publicly available sources.”

“She Was Mine First!”

Nail technicians with pre-existing clienteles, however, can take heart. If you leave a salon, no one can stop you from inviting your clients to accompany you, although you should clarify this point with the salon owner up front.

“The parties can and should always cover this issue during the hiring in interview and reach an agreement.” Riebling says.” Absent any discussion or agreement, I would say that once an employee contributes her existing clientele list to the salon, it becomes the property of the salon.”

By the same token, he continues, “If the employee later leaves the salon and if no agreement prohibits solicitation of the salon’s clients. She should be able to solicit those clients brought with her based on the pre-existing relationships that were created independent of the salon.”

What is murky is whether the salon can legally gather client information on an employee’s pre-existing clients. According to Riebling, the salon owner would have to show that adding that customer to then client list was unretared to the employee’s prior disclosure of the same customer. “In many cases this is a difficult buuden to meet,” he notes.

However, Joyce Hampers, an attorney as well as owner of Boston’s Giuliano salon and spa, disagrees. “I would think you can solicit their clients because once they’re seeing them on our time and overhead and show their history in our computer, then I can take the position that they belong to the salon as well,” she says.

Not that she would do so, she says. “I tell people who come here they if they can prove which clients they brought with them then they are entitled to take them when they leave.” She adds, “If you don’t make that exception you won’t get good, experienced people to come.”

To salon professional considering making a move, Hampers has this advice: “I would recommend asking for something in writing that states these clients are their property and do not belong to the salon. It can be a very simple statement.” By the same token, a nail client who chooses to have a service preformed by anyone else in a salon then also becomes a client of the salon as well.

The Joys of Ownership

Whereas with employees the murky area arises with pre-existing clients, with independent contractors it surfaces with new clients. On the one hand, the law is clear that independent contractors own their own single-operator salon, the space which they lease from a landlord in this sense, the independent contractor or booth renter retains sole ownership of her clientele information.

What’s less clear, though, is who takes ownership of the client who calls or walks into a salon and requests, say a manicure. “This is a gray area,” Riebling admits. “The test would really be determining who’s responsible for the client coming in. If it’s because she heard about a particular independent contractor’s skills, then that situation is clear. But if the client just saw the sign and stopped in, you could argue that information belongs to the salon.”

Even so, the independent contractor could counter that the location, exterior signage, and anything else the landlord does to attract clients are included in their rent. Is it all a moot point? Hampers thinks so, stating that because the landlord, and indeed any other independent contractors in the salon, are technically separate and competing businesses, the rules of fair competition allow them to solicit and collect client information.

“If I know Mrs. H goes to Jean Pierre’s Nails and would be better served coming to us, Jean Pierre can’t sue me for calling her as long as I don’t contact her using information I got from him.”

Of the four independent contractors we asked, though, not one says she’s ever had a problem with a landlord or fellow independent contractor. ”I keep my own client books at the salon unless I know I’m going to be away for an extended time,” says Rima Kitsko, owner of spoiled Rotten Nail Studio in Indianapolis, Ind. Anyone at the salon can access them if they need to. If a salon were to solicit her clients after she left Kitsko says she would express her displeasure and decide her next step based on the owner’s response. “Maintaining a professional attitude when dealing with this sort of situation is a must, and once the solicitation is done there’s not much you can really do about it. I feel that clients are free to go to whomever they want. It’s part of my job to make sure that person is me.”

Enforcement: A Whole Other Issue

 

Having the law on your side is one thing, but actually having it come to your defense is another. A salon’s remedies under any of the laws Riebling describes include getting a court order prohibiting the use of the salons’s information and potential compensation for lost profits because of the information’s use. As Hampers notes, though, criminal or civil courts can be both time-consuming and costly and sometimes fruitless. “It’s nice to think the district attorney will pursue your complaint,but most DAs have a lot to do and chances are they’re not going to be excited about pursuing your complaint.” she says.

“Then, during the exit interview, you should sit the employee down and ask if they are taking any client information with them, reminding them that the in-formation belongs to you. Then, if you do find out they’ve solicited clients, you can show they did so in bad faith.” Another smart move, he says, would be to send a letter to the new employer alerting her to your policy and the law.

           

“The idea is to put everyone on notice so they can’t claim they didn’t know,” he adds. If warned, the new employer is likely to discourage the activity to protect her from being named in any legal action.

If you do decide to pursue an employee for stealing client information, be sure you are prepared for battle.While the law is on your side, you’ll also want s signed agreement or completed signature page from your salon’s employee manual (which will.of course, state clearly your policy on client information).you’ll also need a list of the clients in question and your estimated financial loss (for example, 30 clients X 2 visits per month X $20 per visit = $1,200), as well as any other documentation you can provide.

Make Love, Not War

Ultimately, though, your best policy regarding the handling of client information may be one similar to Elabassi’s.

“If the only thing stopping someone from leaving here is their client files, I don’t want them,”he says.

“I fell the same way about clients: I won’t want an unhappy client or one who comes just for so-and-so. I want them here for the whole package-the atmosphere, the customer service, and all the extras,” he continues. “It’s not the piece of information that keeps an employee or a client. These days, you can find information anywhere.”

Hampers disagrees and has a very strict policy that says she wouldn’t hesitate to enforce. Still. She is the first to acknowledge the difficulties in doing so, and admits that is more to keep the honest, honest and to put the dishonest on warning, ” It’s easy for the nail technician to say she didn’t take anything that these people called her. There’s no law against her telling a client that she’s leaving and where she’s going,” Hampers says, “or for that matter, against giving clients her home number just in case.”

Bloom also takes an aggressive stance on enforcing his policy with nail technicians by taking them to court to enforce his non-compete contract, which everyone is required to sign before starting at Nails Now! still, he knows that many of his technicians collect client information. “Am I happy about it? No. Is there anyting I can do about it? No. But our contract states they can’t work within a three-mile radius of the salon for one year after they leave. That’s how we protect ourselves. The reality is, the client is going to be sitting with the nail technician for half an hour to an hour, and you just can’t prevent them from developing a relationship.” With the contract, however Bloom does try to level the playing field, so to speak, by forcing technicians to move outside the three-mile radius, which prevents them from setting up shop right down the street from him.

Which camp is right? Ultimately, it comes down to your business philosophy. “We lost our top stylist this year, and she was handed her appointment book when she left,” explains Peggy Hatter, co-owner of the Virginia-based Mad Hatter’s Impression salon chain.

“We even hand-wrote letters to some of her clients. I think when you do otherwise, the client is disserviced and it leaves the impression that we’re not as professional as we need to be.”

The “make love” salon owners note that their generosity tends to come back to them, as clients often come back. “Clients are much more comfortable coming back when that’s how they were treated when they left.” Hatter says. “And we’ve also had many employees return as well because it’s not always fun to be out there by yourself. Because they left on a positive note, there’s nothing stopping them from coming back.”

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