Archives for April 2016

Enforcing Noncompetition Agreements Requires Advance Planning, Strong Evidence

In a case that points up the difficulties employers often have enforcing noncompetition agreements while simultaneously highlighting how potentially damaging the restrictions can be to employees, a superior court judge recently denied an attempt by a hair salon to block two of its employees from moving to a competitor. It’s not the first time Massachusetts courts have refused to apply noncompetition agreements to hair stylists, whose work involves personal customer relationships that employers have difficulty penetrating even if otherwise valid restrictive covenants are in place.

In Elizabeth Grady Face First, Inc. v. Garabedian, et. al., the Middlesex Superior Court refused to block the employees’ use of the so-called ‘Elizabeth Grady Way’ for competitor Sofia E. Day Spa. It found that the plaintiff did not meet its noncompetition burden of submitting evidence that its way of doing business was proprietary or confidential. On the contrary, the court found, Elizabeth Grady trains both employees and non-employees at its schools, and the latter are free to take what they learn and compete in the marketplace. The court concluded that enforcing a noncompetition agreement against employees with only this sort of job knowledge would stretch the reach of restrictive covenants beyond what’s permitted by Massachusetts law. Notably, the court found, there was no allegation that the employees improperly solicited Elizabeth Grady’s customers. The contractual restriction against the employees working for a competition within 25 miles of their former employer was thus not likely to succeed.

The case is instructive to employers and employees alike. For businesses, it points up the need to amass a full and complete record when seeking to enforce noncompetition agreements. It is the employer’s burden in all such cases to demonstrate that their former workers are acting unfairly – cheating, if you will. The failure to do so is among the most common reasons that restrictions against competitive employment are denied by courts in Massachusetts, and employers should remember that simply having a valid contract with specific work restrictions is not enough to justify enforcement. For employees, the Elizabeth Grady case sends an equally important message: be wary what you sign. Regardless of the outcome in this and other cases, the defense of even a failed effort to enforce a noncompetition agreement is costly, time-consuming and stressful. It almost always drains valuable resources that are better spent elsewhere. Whenever possible, employees should decline to sign noncompetition forms or, if that’s not possible, seek to modify them in reasonable ways.