On March 25, 2016, a Massachusetts Superior Court judge struck down skin care salon Elizabeth Grady Face First, Inc.’s (“Elizabeth Grady” or the “Company”) attempt to make its non-compete agreement seem prettier than it actually is. In denying Elizabeth Grady’s motion for a preliminary injunction, the court stressed that employees’ conventional job knowledge and skills, without more, will not constitute a legitimate business interest worth safeguarding. The case is Elizabeth Grady Face First, Inc. v. Garabedian et al., No. 16-799-D (Mass. Super. Ct. March 25, 2016).
Summary of the case. Elizabeth Grady sought a preliminary injunction to enforce the non-compete provision in the employment agreements of former employees, who trained as aestheticians and massage therapists at its day spa in Burlington, Massachusetts. While at Elizabeth Grady, the employees had signed agreements that prevented them from, among other things, copying, taking, disclosing or using any confidential information following their termination of employment, and from soliciting its customers or working for a competitor within 25 miles for one year following termination. Upon resigning from Elizabeth Grady, the employees went to work at a skin care salon and day spa within the 25-mile radius.
In denying the requested injunction, the court noted that Elizabeth Grady presented no evidence that either former employee had copied, taken, disclosed, or used any confidential information, nor did the record even remotely suggest that the retail-level employees would have enjoyed access to sensitive materials of that nature. The court further noted that there was likewise no evidence that the former employees had solicited any of Elizabeth Grady’s employees. Therefore, the court focused Elizabeth Grady’s cause of action on the twenty-five mile non-compete restriction.
The focus of the court’s analysis was on the nature of employee’s duties and the training they received from Elizabeth Grady. Specifically, the court indicated that although the Company alleged that it had trained its employees “in its skin care service techniques, client management procedures, and such other business methods as salon dress codes, gift certificates, appointments, and sales promotions,” it failed to present any evidence, or “even a common-sense inference,” that any of that information is truly proprietary to Elizabeth Grady, or was maintained in confidence. The court stressed that although the Company’s agreement summarily asserted certain product development plans, marketing initiatives, and other business strategies represented confidential information to be protected, Elizabeth Grady did not present any evidence that showed that the former employees themselves actually enjoyed access to such information and therefore were in a position to exploit it. Further undercutting Elizabeth Grady’s need to protect any of these trainings, which it referred to as the “Elizabeth Grady way,” as confidential was the fact that it taught a great deal of this training it now claimed to be proprietary to the public at its Elizabeth Grady Schools.
Lastly, recognizing that Elizabeth Grady enjoys a business reputation in the skin care industry, and its products and services draw clients to its salons on a repeat business, the court nevertheless found that there was no evidence that the former employees had any ongoing relationships with Elizabeth Grady clients or were otherwise soliciting or threating to take business away from the Company. Notably, the court stressed that even if there was evidence showing that Elizabeth Grady’s clients had begun to migrate to the former employees’ new day spa, “such evidence would still not (standing alone) permit a reasonable inference that the Company’s good will is being improperly appropriated.” Rather, such evidence would show that, by traveling a greater distance to access the employees’ services, the customers feel loyal to the employees, and that true good will belongs to the employees as opposed to the Company. The court likened this to Joymark v. Lockward, and Lunt v. Campbell, two other cases in which courts held that, in the hairdressing industry, the goodwill logically belongs to the stylist.
Accordingly, the court held that Elizabeth Grady had not presented any evidence to demonstrate that its non-compete agreement safeguards a legitimate business interest, such as the former employees possessed or exploited trade secrets, confidential information, or customer good will belonging to the Company. Rather, the Company was simply attempting “to thwart ordinary competition from conventionally skilled service providers.”
Take-away. Elizabeth Grady Face First, Inc. v. Garabedian reminds us that no matter how pretty you try to make a non-compete agreement, to be enforceable it must protect a legitimate business interest, not merely ordinary job skills and knowledge.