Can the Salop (1979) model also be applied to labor markets or is there any reason why it should not be?
I have provided one reference where Salop (1979) is applied to labor markets:
Staiger et. al (2010) 'Is There Monopsony in the Labor Market? Evidence from a Natural Experiment' Journal of Labor Economics.
You will find another application in section 3 - on matching - of the article
Puga (2004) Micro-foundations of urban agglomeration economies.
The basic motivation for the application of the Salop 1979 model is in this case the assumption of a skill-space. Labor is heterogeneous and different companies are more productive when hiring labor that matches their needs in skill space.