Legal Tea for Hairstylists w/ Braden Drake (Non-competes, LLC vs. Sole Prop, Policy Contracts etc.)

Hello, friend. Welcome back to the Modern Hairstylist podcast. I am so excited for today because we're gonna be talking about something that the beauty industry, I feel like, never freaking talks about. But I think it's something that could be extremely important in many different situations.

And I have just the perfect friend to come in here and talk about it, uh, with me today and share all the love and knowledge with y'all. So, today, I am so excited to introduce my friend, Braden. What's going on, dude? Welcome to the podcast.

Uh, hi. Thanks for having me. I'm excited to be here and chat about stuff. Yes, welcome.

So if you wouldn't mind giving us like a mini introduction, Braden, before we get into this gig. Like tell us who you are, what your Instagram handle is, what you do, and all of the good things. Sure. So, uh, hi everyone.

My name is Braden, as mentioned. I am a California licensed attorney. I live in San Diego, the bright and sunny, way down south. And I also am a tax professional.

So I have a master's degree in tax law, which means I do a little bit of both. And, oh yeah, my Instagram handle, bradenadamdrake, B-R-A-D-E-N. Adam is my middle name and Drake is my last name. Lovely.

Thank you so much, Braden. Let me guess. You are a hustling, bustling hairstylist behind the chair, working so hard to build a beautiful career for yourself. One that gives you time, freedom, and energy to spend with yourself, your family, and your friends.

But you feel like you're always working in your business, even when you're not behind the chair. My name's Hunter Donia, and I help you automate your systems and implement really beautiful strategies so you can grow your business without the overwhelm. And this is the Modern Hairstylist podcast. So today, I wanted to ask you a couple questions that, um, some hairstylists have been asking me.

And also just within the past, like, two years, eh, we've... Us as hairstylists have gotten much more weary about, like, what our boundaries are and, um, protecting ourselves and our business and just getting a little bit more business savvy than what, how we used to be and how we've traditionally been as an in- industry, right? The first thing that I want to ask you, though, uh, before we get into it, is do you think that, like, getting legally set up, uh, and, you know, having those foundations and fundamentals is absolutely essential for every single business, no matter who you are and what you're doing? Oh, for sure.

It's just the, like the type of protections you need are gonna vary by business. Like everyone, like has some shit that they need to minimally do. So I te- like to teach a concept. This is something I teach in all my programs.

It's called, I call it the layers of protection, pretty simple. And I say the layers of legal protection are like layers of clothing and it's very dependent on a variety of circumstances. So if you're gonna go on a trip to Alaska in the wintertime, you're obviously gonna pack like a lot more warm clothing than what I might need like where I'm currently living, right? It's variable.

So likewise, the layers of protection will be dependent on your business. But we have a few that I call the essentials. So like the primary essentials are insurance and contracts. Those, like I've yet to really meet a business that doesn't need both of those things.

And then the next one I call, it's like quasi-essential, is an LLC or a business entity. So those are the core three, but you definitely wanna start with insurance, contracts. Pretty, um, pretty low barrier to entry with those things. You can get them pretty affordably and start your business off on the right foot.

Okay, gorgeous. And I want to ask, like, 'cause I feel like a lot of people get confused with this. I'm sure you get this all the time. What is the difference between, like when, when we're talking about like business entities, right?

Um, what is, whe- when, when does the... Where do we draw the line with, like, accounting, right? And like 1099s and like filing taxes and stuff like that? And when do we draw the line with, like, business entities and, like, the legality of all of that stuff?

Yeah. So really just, like, kind of the difference betw- like how entities are impacted both from a tax and legal perspective? Is that the question? Sure.

But I, I feel like people get like really confused as to like, as to like, "No, this is something that you need to ask your attorney/this is something that you need to ask your accountant." You know what I'm saying? Got it, got it. Yes.

Okay. Yes. So this is a particularly, particularly touchy subject for me, um, because, like I mentioned, I do both law and tax. So I kind of approach it from both of these angles.

And I see accountants who give really bad legal advice unintentionally, and I see attorneys who give really bad tax advice. It's a great question. Here's the thing that people need to realize, is entities... And again, I come, I come primarily fro- from law school, so I, I tend to be a little bit more biased towards the legal profession than, like, my CPA friends.

And from my perspective, a legal entity is... It's... I just said it. It's a legal entity.

Keyword being legal, right? So you form an LLC. An LLC is a function of law. So you form it under your state law.

It's there to provide you with liability protection. That is a legal thing. It's not a tax thing. You don't form an LLC to save any taxes.

Okay? You form an S corp to save taxes. Different thing. You can have S corp status on your LLC.

But what pisses me off is when I hear CPAs say, "Don't form an LLC, it's not gonna save you any taxes." Well, obviously, like that's not why we form it. We form it for liability protection. Right.

So in short-You wanna... It sounds dumb to say you talk to your attorney about legal stuff, talk to your accountant about tax stuff, but it's alw- it's hard, it's hard for someone who's not an expert in either to know whether something is a legal question or a tax question. I don't know if I just kind of, like, ranted or if I actually answered your question, but that's at least getting us started, I think. No, tha- and I mean, I h- I have a pretty good understanding of this stuff by now, um, and so, I mean, it totally makes sense to me and I com- and I, and I like everything that you said.

But it's, it's true, like, a, like, an accou- an accountant will say, like, "Well, you should maybe do this to, to save taxes or this, that, or the third," but it's like, it has nothing to do with that a lot of the time, so that makes sense. And, and a lot of hairstylists, we a- a lot of us are independent businesses. Like, a lot of us are, um, you know, we're not working for somebody. We are, we are our own, like, contractors, we are our own businesses.

And a lot, a lot, a lot, a lot, a lot of, uh, hairstylists start out just as sole proprietors, and later... And then they're, like, a year in or, or two years in and then they maybe are feeling like, "Well, maybe I should LLC. Um, maybe, like, this should happen just, just in case. Just for liability reaso- reasons."

Or, they want to S corp but they don't have an LLC, right? So, when... So, do you think that it's, like, better safe than sorry for everybody to just LLC right off the bat or, like, as soon as they possibly can? Or do you think that there are instances where people can just be sole props and it's like, whatever, it doesn't matter?

Yeah. So I'm a big fan of LLCs, particularly if they're cost-effective in your state, right? So California's the most expensive. LLCs here cost $800 per year to own and operate.

Most states are m- much more cost-effective. Like, I think my home state of Indiana is $35 every other year, in which case, like, like shit, just, like, do your, like, just form your LLC. It's so cost-effective, right? But particularly in your line of work, like it's not super dangerous, it's not super high risk, but any time you're, like, that close to someone's face with scissors and, like, hot instruments that, like, heat with a...

You know, they, like, plug in and, like, get real hot and you can burn people. I don't really know. Uh, you could probably tell, I have very low maintenance hair myself, but I have sisters, okay? And I'm gay, so of course, you know, my friends think- ...

that they can come to me for this kind of advice even though I don't know. Um, so that's, like, my basics in under- like, my basis in understanding of hairstyling. But yes, LLC is a good idea. Okay, perfect.

So, like, the rule of thumb is, like, you might as well LLC unless it's, like, you know, you literally probably shouldn't because of it's crazy expensive, like, depending on where you're living. But then try your best to get there when you can. I would say that that's, like, the synopsis. Yeah.

And the, and the, and the, um... Just to really kind of bring it home, is just look to see how expensive it is in your state and if you're like, "I literally cannot afford this right now," make sure you have insurance, make sure you have a good contract liability waiver, and then get your LLC as early as you can, like on after that. Right. So, okay.

Great. Thank you so much. I think that actually really is gonna be super helpful for people because it's, like, the number one thing that people ask, I feel like, all the time. Um, and then I wanna ask about this.

So, we... I am really big ab- about salon policies and I'm really big about, you know, having a cancellation policy, having a lateness policy, having a redo policy, all of the... A product return policy, right? All of these things.

And so I'm assuming things like that where if they are signing those policies, right, or digitally agreeing to them in one way or another, that is a form of a contract. Am I correct? Just to, like, clear that out of the way. Yeah.

I mean, anything could be a contract as long as you're getting... As long as the, the person's, like, agreeing to it, right? So, put it on paper, have them sign it. This is what I always tell people.

Like, "Put that shit in writing." There's your contract. Right. And so is there, is there anything that is, like, absolutely required for something like that to hold up, right?

Like, and I... And honestly, I coach mostly to digital signatures and digital agreements so I... So is there anything, especially when we're talking digitally, right, is there anything that you, like, is absolutely essential for a contract or agreement or signature, whatever, to hold up in a legal battle or whatever it may be? Not, not really.

I mean, you need to have... Like, they need to sign it, right? So they need to, like, consent that they've read the thing and they've signed it. And there are some other things, right?

So you don't wanna, like, force anyone to sign anything under duress. That's a legal principle, but, you know, you get, like, all kinds of images. You're, like, holding someone hostage or something and you, like, forcibly force them into signing a contract. That's not enforceable, right?

That's duress. So that's not typically gonna be a problem, but if you're like, "Look here, lady. I got a, I got a f- 30-minute time block. You gotta be in my chair within three minutes.

Uh, I'm not gonna give you time to read that contract. You just have to sign it." Well, then she's gonna argue that you, like, made her sign it under duress. Very...

Like, none of that shit's gonna happen, okay? All the other stuff, I mean, as long as it's a formal document, it's written, they have time to look at it and actually no one's gonna read it anyway, but as long as they have time to read it, you're not forcing them just to sign it, you're probably gonna be good to go. The real question is, like, or, like, one of the questions is, like, what can't we do? So, I think people are often surprised at what actually can be a binding contract.

Like, oral contracts are valid in a lot of circumstances. Like, an email exchange can constitute a contract if you agree to things via email. Um, but there are some things we can't put in contracts. Although, I kind of invited you to ask a follow-up question on that, but let me just let me just preemptively tell you.

The things that you can't put are, um, more apply to, like, contractor agreements. So, I don't know. We can go there if you want, especially if you have, like, people who have booth renters in their salons and things.Yes.

No, exactly. And that, that is one... That's something that I wanted to talk about today, because that is something that, like, very much is, is a crazy situation in our industry as well, is, you know, I am a booth renter, what are my rights as a booth renter? What do those agreements look like?

And as for booth renter- rental salon owners, what can I, what can I make my booth renters, uh, uh, adhere to, like, in my space? Et cetera, et cetera. Yeah. So when I was thinking about things you can't put into a contract, my mind immediately goes two places.

So the first one would be applicable to your clients, and that's a non-disparagement clause. Um, those aren't allowed in some states. Like, here in California, we're very consumer friendly. And a non-disparagement clause is basically a clause that says, like, "Hey, you can't write, like, bad Yelp reviews if you, like, don't like the end result of the service."

Right. Some states don't allow that. Um, from a contractor perspective, or a booth renter's perspective, some states are very, very strict when it comes to non-compete agreements. So this would be a clause that says, like, you know, "If you work here, you're not allowed to provide services somewhere else."

Right? And this, um... Booth renters, I feel like it's, uh, it's a lot different than other contractor circumstances, because if you're just renting space, it's like you're not even really that person's contractor. You're more of, like, a lessee/lessor relationship.

That's the legal term. Right. Right? Um, so they shouldn't probably be dictating, like, any of that kind of stuff.

Especially, um... I'm not sure if you're aware, but in California, we have like really fucked up contractor laws now, and they're being adopted in other states. And when I talk about the contractor laws, that has more to do with who can legally be considered a contractor and who can be... who must be considered an employee.

So what I'm referring to, so this is very applicable if you have booth renters in your own space, what you can require them to do, um, in order for them to remain a contractor, or basically not an employee. You need to be really careful, because if you're dictating their time of work, what they wear, all this kind of stuff, now they look like an employee and you're gonna have to pay their employment taxes, and that's like a whole different can of worms. Yes. Okay.

That totally makes sense. Okay, so that's fantastic. Now let's talk about, like, um... Let's talk about, I think...

What did you say? You said, like, what you can't do, right? So disparagement. That means, like, you can't, like...

Like, you can make sure that, like, nobody leaves, like, a Yelp review, a Google review, et cetera, et cetera. Is the exception to that, like, if it was untruthful? Like, is that slander, um, and is there a way to, like, legally have somebody agree to, like, no slander? Like, is there, like, a workaround or is that not really the tea?

No, probably not. And again, for things like non-disparagement clauses, state by state specific. So if you wanted to put it in your contract, just Google, like, are non-disparagement clauses allowed in Missouri? And see what Google has to say.

And, you know, warning with Google, right? You got to be careful what you read. You probably will find a lot of blog posts from law firms. Hopefully those are gonna be very reputable, right?

It's att- like, attorneys writing this stuff to get business. Um, what I always tell people is if the Google consensus is like every blog post says, "Totally fine in Missouri, don't even gotta worry about it in Missouri," then you're probably good to go. If there's a lot of gray area or if people are disagreeing, that's when I would either, like, not include it or hire an attorney. Okay?

So is the slander portion... Um, can you put... No, you wouldn't really... Yeah.

You wouldn't really put that in your contract because, you know, that's like... You know, it's like putting other things that are illegal in your contract. Like you, like, you agree not to, like, punch me in the face, like, kind of a thing. Um, like, you agree not to commit battery or arson of my property or any of that kind of stuff.

Like, that's just against the law, so we don't have to put it in our contract. Um, yeah. Okay. Gorgeous.

Um, I want to pull up a DM that I got from one of my followers on Instagram that actually triggered me to reach out to you to come on and answer some of these questions. So they said, "Hunty, I'd love to hear a podcast on liability. Recently, I heard about a situation in a salon. A stylist ca- cut an, caught an ear piercing and pulled the ball up into the cartilage.

The stylist never even saw the earring because it was under the fold of the ear. They suspect it was already embedded in her ear. Either way, the client bled just a little. Less than a nose bleed, not even a drip.

She had to have the earring removed. She refused to stop the service and get... and to get it... and get, get it...

She re-... The client refused to stop the service and to go and get the wound, I guess, taken care of. She refused to go to a piercing studio. It didn't seem like an emergency or reason to call, call an ambulance.

She insisted on going home and having her husband remove it." "Twelve y-... Twelve hours later, she went to the ER. Her service, uh, her service was complimentary.

They made her service complimentary because of what happened, but she wanted her $300 ER bill covered by the salon. She asked about the salon having liability insurance. Her ear was not, uh, maimed or torn open. She said there was no complications getting the earring out."

And so her question would be, what protocols would you put into place if a stylist cut someone, ripped an earring out, shaved off a skin tag, sew on, slice an ear lobe, whatever it may be. Uh, should you call the ambulance? Would you charge for the completed service? Uh, would you submit to your liability insurance?

Um, et cetera, et cetera. Okay, wild. So the answer here, actually, I don't think is that complicated. I...

I would call your insurance agent. Call your insurance agent, ask them what you should do in this circumstance. Pretty straightforward. Because here's the thing, the reason why that client asked if you had liability insurance is because she's contem- she's probably contemplating getting an attorney or she's already talked to an attorney.

Because let me tell you, let me tell you how this all works. I, in law school, I interned at a plaintiff's firm, so this would be the type of law firm that this client would go to if she wanted to sue your ass. All right? And I remember, I worked specifically on a case where we sued, we didn't actually sue them, it was like a demand letter, so basically like, "Give us money or we will sue you," kind of a situation.

And it was a, it was a spa, and our client got an infection from the, what do you call that? Like, the foot bath situation. Pretty common, pretty gross. Pedicures are great though.

So, and, and what happens is they have insurance, right? So we're contacting them, they're sending it to their insurance. We're like, "Hey, you have insurance. Your insurance cap is $15,000.

Our client wants $15,000. If you don't give us $15,000, we're gonna sue you." And they say, "Okay, here's your $15,000." Like, that's just how insurance works.

So this person, like, maybe nothing actually is wrong with her, but she's gonna go talk to an attorney. That attorney's gonna claim the actual damages, which would be the $300 ER visit, um, plus they're probably gonna claim pain and suffering. Now, this woman may not have actually had, like, enough of a case for an attorney to be like, "We'll even take it." Um, but for some attorneys the bar's pretty low.

But this, again, is why insurance is such an important layer of protection, because you're immediately gonna contact your insurance agent. You're gonna say, "This is what happened. What should we do?" Um, and then they should be able to guide you from there.

Okay, gorgeous. So, like, the insurance agent should be the trusted human being when it comes to anything like this, and, like, what the next step should actually be to take? Yes. And as far as, as far as, "Should we give the $300 back?"

I would, I would say in the grand sche- What was the- Did you say it was 300? That was how much the service was? Y- So, it was 250, and they, they gave her the 250 compli- like, the 250 service complimentary, but then the woman was asking the salon to cover the $300, uh, emergency room bill. Got it, got it.

So, um, the 250 complimentary, like, fine, um, but if you ever, like, waive something like that, I would consider having them sign a liability release agreement that basically says, like, you know- Yes. "In exchange for us waiving this, like, we're not admitting any fault, like, we're not admitting any liability, and also you're agreeing not to sue us." Okay? As far as paying for the ER visit, $300, not that much money in the grand scheme of things, especially if it's gonna protect you from a lawsuit, but that's not something that you wanna do without talking to your insurance carrier first or a reputable attorney, because it gets into kind of, like, a slippery slope of, "If you give them the money, are you admitting liability?"

You definitely would want to have a legal document in place for that and probably talk to a lawyer. That makes so much sense. And I love that you said, like, if you are gonna c- make the service complimentary, like, having them sign something, uh, in exchange, right? I think that is a really smart idea, and I think that's just a smart idea for if you're gonna refund somebody for anything or whatever it may be, to, like, make sure that, like, the terms of the refund or the complimentary service, whatever it may be, um, are very clear, if there are, like, further expectations in return- in exchange of the refund.

I think that totally makes sense. I have one question, and I'm gonna be, like, going back to non-competes for a second, because non-competes is also a massive topic in my industry right now, um, because a lot of c- uh, commission/team-based salon owners with W-2 employees, a lot of the times they will have non-compete, uh, agreements in their salon. And I'm sure that it very much varies state to state, um, but, you know, it's a very controversial thing. Like, a lot of hairstylists nowadays are saying, like, "Oh, well, non-competes are non-ethical."

Some people will tell you that they don't hold up in court. Some people will tell you that they very much do hold up in court. So, what do you think? Like, should somebody be very careful or try to negotiate their non-compete, like, when they're signing one in a salon?

Can- d- how- like, what's, like, the, what's, like, the... Do you know i- Do you know what the chance of that actually going through and, like, working in court would actually be, et cetera, et cetera? What do you have to say? Yeah, so again, state-specific, right?

And a lot of the times, if anyone gives you an answer with, like, too much certainty, like, they probably don't know anyway, all right? So take their advice with a grain of salt. Um, b- Because it is gonna be pretty variable in court, right? Um, so I'll give you an example.

I remember my sister reached out to me about this because she owned a local gym, and she had a constant problem of everyone that worked for her, she would train them to do personal training, and then eventually they would leave and they would start their own personal training business. And she lived in a very- Right. small community, so competition... You know, even if there's only five of them doing it, there's not that many people in the town.

And I would tell her, um... She didn't really like this. She's also, like, my older sister, so it's, like, weird when I have to, like, boss her around and she's asking me for legal advice, right? But I'd tell her, like, "You know, at the end of the day, it's a fact of life, it's part of business.

Um, you just have to be, like, such a good boss that no one wants to leave you." Like, "I don't wanna go start my own business 'cause this is such a good gig," right? That's obviously a hard, like, a hard bar to set. As far as, like, "Should I sign this non-compete?

Should I accept this job? Should I negotiate it?" Here's the deal. It's a little bit different for me because I'm an attorney.

So if I went to go get a job in California and someone had a strict non-compete clause, I'm like, "I don't really care, I'm gonna take the job, because I know that at the end of the day, if I wanna, if I wanna go leave and do my own thing, they can't do anything about it, even though I signed this 'cause it's not enforceable here." Um-In other states, like in Indiana where my sister was, the non-compete must be specific as far as time and geographic location, and that's typically the standard rule in states that do allow them. So, what that means is if you're gonna have a non-compete clause, it has to be specific in terms of, here's an example. Um, contractor or stylist agrees not to form a competing business providing X, Y, and Z services within one year of completing, uh, work for me, the company, within a 30-mile radius of this ZIP code.

So that's, like, pretty specific. You can't say, "This person can never do anything related to this ever and, like, any place." Right. Right.

Okay, cool. All right. Thank you for laying that out for us. So, Braden, this was really freaking cool.

I think we answered some, like, hot freaking topics, in my opinion, that's going on in my industry. And I know that you cover so much more, like, within your programs and education and stuff like that. But I think that you do have something open right now, uh, at the time of recording this, that I think is super valuable that I invested in myself. Um, and if you want to talk about where people can get more resources from you or what you have to offer right now, we would love to hear about it.

Yes. So, what we're mentioning there, what you're mentioning there is the Contract Vault. So it's my entire bank of contract templates for $30. Um, it's really kind of a steal of a deal 'cause I used to sell each of my individual templates for $100 to $300 a piece, and now they're all in one place for 30 bucks.

So people can go to www.bradendrake.com/contractvault. Now, I will let you all know that at the time of recording this, I don't have any stylist contracts in there, but I'm a big believer in, um, I create stuff first and foremost for my paying students.

So, if some of your listeners join and they would like specific contracts, we will put them on the list to get them added. I actually did do a booth renter agreement for a client in the past, so I could add that template and definitely get, like, a liability waiver and that stuff. So, go buy that. Um, I also have a Facebook group.

I have my own podcast, Unfu*k Your Biz with Braden, put the asterisk for the U to find it. And tons and tons of free resources, podcast episodes, and blog posts on my website. Yeah, dude. I think that's freaking awesome.

And I don't think that people really understand, like, the value of all of those contracts for $30. Like, contracts ... And especially to get one, like, made for you, are incredibly expensive. And the cool thing is, is don't you teach people how to edit them, like, in the course, right?

In the vault? Yeah. So I have training. So it's funny, I used to sell it as a course.

Um, and then I s- smartly learned, and you'll understand this as a fellow course creator, that it's all about messaging, right? So, no one wants to buy a contracts course. No one wants to- ... no one wants to learn about contracts.

So now instead I'm like, it, um ... This isn't, it's not being manipulative. Like, I can message it both ways. Now I sell it as, it's a bank of, it's a bank of contract templates and it would probably be smart if you watched the videos and learned how to actually edit them properly.

But if you wanna, want to do that and you just want to go HAM with the templates, you know, go for it. But yeah, there's, uh, really great training videos in there as well. Very cool. Awesome.

Thank you so much for sharing that with us and, uh, sharing all that you do. I think it's really, really awesome. Like, it's awesome, scary, boring stuff that you're making interesting and you're making it accessible to everybody. So I think what you're doing is very, very cool, Braden.

Thank you so much for spending some time with us at the Modern Hair Stylist podcast. We very much appreciate you. Everybody, please go make sure to go check Braden out and, uh, uh, check out his resources and dive in and buy into his Contract Vault so he makes us ... and he releases his booth rental template to us, please.

So Braden, thank you so, so much. I appreciate your time here today, um, and I'll talk to you soon. Thank you so much. Thank you.

End of transcript. © 2022 Hunter Donia LLC.