Australia: Non-compete clause in shopping centre lease leads to discrimination complaint against barber shop

A Brisbane barber shop was recently in the press for denying services to a woman based on her gender, due to a non-compete clause in its lease.

The incident involved a woman, Vivien Houston, who was refused service at Jimmy Rod's Barber Shop at The Gap Village Shopping Centre in Brisbane. Jimmy Rod's Barbershop is a chain of 14 barber shops, located mainly in Queensland.

Non-compete clause in lease specifies that shop will only serve men and children

The barber shop had been a tenant at the centre for ten years. The shop's new lease contained provisions from the previous Jimmy Rod's leases, including that the premises could only be used as a barber shop by men and children.

The staff told Ms Houston that they were unable to serve her due to a non-compete clause in their recently renewed lease agreement, which was designed to prevent them from competing with other hair salons in the centre. This is at odds with Jimmy Rod's other barber shops, which do cut women's hair.

The barber shop was subsequently sent an email by Ms Houston, advising them of her intention to lodge a complaint with the Anti-Discrimination Commission Queensland.

Businesses can legally decline to provide services outside their expertise

The incident raises the interesting question of whether lease agreements can be discriminatory. The scenario is complex, but when it comes to anti-discrimination, it is ultimately the circumstances which determine whether the discrimination was legal.

If the barber shop specifically advertised itself as a specialist men's hair care provider, it would not be in breach of discrimination law, which focuses on differential treatment in the same circumstances. This is because a provider offering some technical expertise would ordinarily be on safe legal grounds to decline providing services outside of that expertise.

In a similar vein, a Chinese restaurant can legally advertise for Chinese wait staff, or guards of a particular gender may be hired where frisk searches or strip searches may be required.

Unfortunately for the hair salon, it said it would have accepted Ms Houston, but for the fact that its lease prohibited it from competing against women's hairdressers in the same shopping mall.

Anti-discrimination laws vs. contractual lease conditions

The complexity arises in this case because the business is caught between two legal duties – complying with anti-discrimination provisions and complying with contractual lease conditions. Generally, legislative rules trump lease conditions. This means it would be defensible for the barber shop to defy the lease agreement and refuse to discriminate against women.

However, if the business chose to do this, it could suffer financial ruin as a result of a dispute with the shopping centre owner over the terms of the lease. In such a scenario, the outcome could hinge on the question of whether the non-compete clause was a fundamental condition of the lease.

Jimmy Rod's has confirmed that it has now successfully negotiated a new agreement with the centre that will remove the problematic clause, and it has also notified Ms Houston of this fact.

Careful wording can circumvent a clash of legal duties

On a practical level, instead of specifying that the shop would only give haircuts to men, the lease could have been reworded to state that the shop would only do "men's haircuts". This would mean that a woman who wanted a man's haircut – like Ms Houston – should be able to be served by the shop without the lease provisions being breached.

Due to the complexities of commercial leases, any business that is considering entering into a commercial lease should seek legal advice.

Geoff Baldwin
Business disputes and litigation
Stacks Champion

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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