Opinion
216-2020-CV-476
06-30-2020
Daelynne Kirlis Boudreau v. Wax Specialists LLC
Order on Motions for a Preliminary Injunction
Plaintiff Daelynne Kirlis Boudreau and Defendant Wax Specialists LLC ("Wax Specialists") both move for preliminary injunctions in connection with non-competition agreements that Boudreau signed while employed by Wax Specialists. Boudreau seeks an order enjoining enforcement of the agreements and Wax Specialists seeks an order compelling Boudreau's compliance with the agreements. For the reasons stated below, the Court GRANTS Boudreau's motion (on the terms defined on page 11) and DENIES Wax Specialists' motion.
Facts
The Court finds the following facts from the offers of proof made during the hearing on June 26, 2020 and makes these findings for the limited purpose of its rulings herein on the motions for a preliminary injunction.
After graduating from a five month esthetician program, Boudreau began working for Wax Specialists on or about March 21, 2016. On that day, she signed the company's policies and procedures. The parties agree that either that same day or a week later she signed the first non-competition agreement (the "2016 Agreement"). Boudreau maintains that she signed the agreement on March 28, 2016, the date that is indicated in the agreement. She also notes that the parties are in agreement that she was not asked to sign the 2016 Agreement until after her employment began.
The 2016 Agreement, which recited consideration of continued employment and future training, prohibited the following activities in the event that Boudreau's employment terminated:
1. Competing with the company;The 2016 Agreement's non-competition provision operated for two years and prevented competition within five miles.
2. Appropriating the goodwill of the company;
3. Entering into any agreement with any customer of the company to provide similar services;
4. Making any disparaging comments about the company;
5. Making any advertisement or solicitation which references Boudreau's former affiliation with the company or uses any trademark of the company; and
6. Soliciting the employment of any former co-worker or contractor.
In April of 2018, Wax Specialists required Boudreau to sign a second non-competition agreement (the "2018 Agreement"). This agreement prohibited the following activities in the event that Boudreau's employment with the company terminated:
1. For two years, participating in any way in any business within 20 miles of the company's location in Manchester that competes with the company or is similar to the company;
2. For one year, soliciting the employment of any employee of the company; and
3. For two years, disclosing any "Confidential Information" (a defined term in the agreement) of the company.
Finally, in August of 2019, Wax Specialists directed Boudreau to sign a third non-competition agreement (the "2019 Agreement"). This agreement prohibited the following activities in the event that Boudreau's employment terminated:
1. For two years, competing with the company in any area that is within five miles of the company's location in Manchester.The 2019 Agreement also stated that if Boudreau left her position within two years of the training program that was provided at that time, she would re-pay 100% of the costs. This term was significantly more favorable to the company than the 2018 Agreement which required repayment of only 75% of the tuition costs if an employee left within 120 days of the training. The 2018 Agreement required repayment of decreasing percentages over the first year and after one year, required no repayment.
2. Appropriating the goodwill of the company;
3. Entering into any agreement with any customer of the company to provide similar services;
4. Make disparaging comments about the company;
5. Making any advertisement or solicitation which references Boudreau's former affiliation with the company or uses any trademark of the company; and
6. Soliciting the employment of any former co-worker or contractor.
The clearest definition of Boudreau's job was contained in the 2018 Agreement which defined her position as "includ[ing] lash extensions, as outlined in your position description, which is attached as Scheduled B." Schedule B provided the following:
The Lash Extension specialist will be responsible for consulting with clients using their experience and education to provide the most desired outcome. This
individual will also be responsible for following up after a visit with clients to ensure satisfactory results and answer any questions.
Additional responsibilities and skills include, but are not limited, to the following:
Schedule B to the 2018 Agreement.• Excellent verbal and written skills
• Ability to provide proof of proper license/certification
• Ability to manage day-to-day responsibilities of being a team member
• Ability to effectively communicate about the service before, during and after
• Willingness and desire to continue education on both technique and service
• Ability to have difficult and honest conversations with a client
• Providing premier customer service while remaining loyal to the brand
• Ability to create a pipeline of repeat business.
The Court credits Boudreau's assertion that she was compelled to sign all three documents. Wax Specialists maintains that it provided ample consideration for at least the last two agreements as they were in exchange for paid educational programs in Massachusetts, the Lash L'Amore Certified Lash Specialist program in 2018 and the Borboleta Certified Lash Extension Specialist program in 2019. But Boudreau notes that the agreement also required her to repay tuition costs for these programs if she left the company within two years of receiving the training.
Boudreau resigned her position with Wax Specialists on March 5, 2020 and accepted a position with Arcadya Salon and Day Spa ("Arcadya"), which is located approximately 1.5 miles from Wax Specialists. Thereafter, Wax Specialists sent several letters to both Boudreau and Arcadya demanding that Boudreau cease her employment with Arcadya. The company also demanded that Boudreau repay the tuition costs of one or both training programs, cease working within a 5 mile radius of Wax Specialists' office in Manchester, and pay certain attorney's fees. In response, Arcadya terminated Boudreau.
Boudreau seeks an order enjoining enforcement of the agreement. Wax Specialists seeks an order compelling Boudreau's compliance with the non-competition agreements.
Analysis
Under New Hampshire law, an injunction "should not issue unless there is an immediate danger of irreparable harm to the party seeking injunctive relief, and there is no adequate remedy at law." N.H. Dep't of Envtl. Servs. v. Mottolo, 155 N.H. 57, 63 (2007). A party seeking injunctive relief also must show that it is likely to succeed on the merits. Id. Courts consider the impact on the public interest and the possibility of substantial harm to others. See UniFirst Corp. v. City of Nashua, 130 N.H. 11, 13-14 (1987). The party seeking injunctive relief has the burden of persuading a court that it is entitled to such relief. Kukene v. Genualdo, 145 N.H. 1, 4 (2000). Federal courts have pointed out that the likelihood of success is the "touchstone of the preliminary injunction inquiry." Maine Educ. Ass'n Benefits Trust v. Cioppa, 695 F.3d 145, 152 (1st Cir. 2012). "If the moving party cannot demonstrate that he is likely to succeed in his quest, the remaining factors become matters of idle curiosity." Id. The logic behind this emphasis is obvious. If the moving party cannot show that she is likely to prevail at the end of the case, it makes little to sense to change the status quo on the assumption that the moving party will win.
Under New Hampshire law, restrictive covenants are disfavored and narrowly construed but will be enforced if the restraint is reasonable. ACAS Acquisitions (Precitech) Inc. v. Hobert, 155 N.H. 381, 388-89 (2007). The reasonableness of a covenant is question of law. Under Acquisitions, this Court applies a three-part test to restrictive covenants: (a) is the restriction greater than necessary in terms of geographic and temporal scope and does it advance a legitimate business purpose; (b) does the restriction impose an undue hardship; and (c) is the restriction injurious to the public. A "yes" answer to any of these questions renders the restrictive covenant unenforceable.
Many of the cases focus on the first test, whether the restriction is narrowly tailored to protect a legitimate interest and whether the restriction is reasonable both temporally and geographically. In applying this test, New Hampshire courts will "blue pencil" or reform or narrow an overly broad restriction if the employer shows that it acted in good faith in execution of the agreement. Merrimack Valley Wood Prods. v. Near, 152 N.H. 192, 200 (2005). Good-faith is a question of fact. See id. In Merrimack Valley, the supreme court affirmed the trial court's refusal to reform an overly broad agreement where the employee did not receive the non-competition agreement until six months after he started on the job and where it was clear that the employee was obligated to sign the agreement in order to maintain his job. Id. at 200-01.
The Agreements
Before reaching the foregoing three-part test, the 2016 Agreement is unenforceable due to the clear violation of RSA 275:60, which was in effect in 2016 and states that a non-competition agreement is not enforceable unless it is provided to a new employee prior to her acceptance of the job. There is no dispute that Wax Specialists did not present the non-competition agreement to Boudreau (or even discuss it with her) prior to her acceptance of the Wax Specialists' job offer in March of 2016. The 2016 Agreement, therefore, is not enforceable pursuant to RSA 275:60.
Turning to the 2018 Agreement, this agreement prevented competition within 20 miles of Manchester for a period of two years. The agreement's geographic scope is obviously quite broad. It prohibits competition within 20 miles of Manchester. Wax Specialists has not put forward any evidence suggesting that Boudreau's client base extended as far as this perimeter would reach. This is problematic as the geographic scope of a restrictive covenant must be consistent with the territory or customer base of the employee. See Technical Aid Corp. v. Allen, 134 N.H. 1, 10 (1991). Accordingly, Wax Specialists does not appear to have a legitimate business interest that would support a 20 mile radius. Perhaps this recognizing this problem, Wax Specialists does not seek enforcement of the 20 mile restriction in this case. Accordingly, the Court views the 2018 Agreement as also being unenforceable.
This leaves the 2019 Agreement, which reduced the geographic scope to 5 miles. While Wax Specialists contends that this cures any enforceability problem, Boudreau argues that the 5 miles restriction is unreasonable because it prevents her from competing within the entire city of Manchester. She claims that the esthetician market is strongest in the city and that forcing her outside this radius is unreasonable. While the Court agrees with Wax Specialists that a 5 mile geographic scope is generally reasonable, one problem in applying this framework to a beauty salon is that beauty salon employees apparently do not have assigned territories or any other potentially unfair advantage in soliciting business within the Manchester market. At most, Wax Specialists could seek to prevent Boudreau from soliciting her former clients. See Merrimack Valley, 152 N.H. at 199 (unreasonable to prohibit solicitation with customers with whom the employee had no contact). Yet it seeks to prevent competition for any customers located in the City of Manchester, a result that runs counter to the general disfavor in New Hampshire law toward restrictive covenants.
The Court also questions the appropriateness of requiring estheticians to sign non-competition agreements. As a non-management employee in a beauty salon with no responsibility for a territory, Boudreau is not the typical high level executive, inventor, stock broker or salesperson that is frequently the subject of non-competition agreements. While there may be situations where such agreements are appropriate in businesses of this kind, the employer must make a strong showing.
In support of its non-competition agreements, Wax Specialists primarily relies on the training that it provided Boudreau both upon being employed and through the out-of-state programs in 2018 and 2019. As an initial matter, Was Specialists does not really suggest that it has a proprietary interest in this information. Apparently one can obtain this information by simply enrolling in a short class. Thus the cost of obtaining this information is the cost of the training and, significantly, Wax Specialists has already incorporated into the agreements a remedy for this expense: the contractual provision requiring Boudreau to repay the company. In light of this provision (the enforceability of which the Court assumes), the Court struggles to see how Wax Specialists' payment for these courses justifies a prohibition of competition in the State of New Hampshire's largest city.
It also bears repeating that in exchange for mandatory training, Wax Specialists exacted from Boudreau two promises in the event she left the company: (1) an agreement not to compete with the company for two years within a five mile radius and (2) an agreement that Boudreau would repay Wax Specialists for the cost of the two training programs. Boudreau's job description required her to participate in these training programs and Boudreau felt compelled to attend the training sessions and sign the 2018 and 2019 Agreements. Thus in exchange for participating in mandatory training, Boudreau had to promise not to compete in Manchester for two years and also to repay the cost of the training. In other words, Boudreau was required to repay the consideration for the restrictive covenants while still having to comply with the covenants. Putting aside the question of adequate consideration, it smacks of double dipping to require both repayment and compliance. This arrangement was clearly an effort to make it very difficult to leave the employment of Wax Specialists so that Boudreau (and other employees) would not resign. That is a not a legitimate business interest.
Further, the Court concludes that the two-year time frame is beyond what would be reasonable. For the reasons previously articulated, the Court is not convinced that Wax Specialists has a legitimate business interest. But assuming that it does, two years is an excessively long period of time to prevent a former employee who worked as an esthetician from competing in any part of the City of Manchester. Cf. Concord Orthopaedics Prof. Ass'n v. Forbes, 142 N.H. 440, 444 (1997). Although the supreme court in Concord Orthopaedics found two years reasonable, that was based on the time it would take for the public to "dissociate" a doctor from his former medical practice. Id. The Court is not persuaded that the relationship between an esthetician and a customer is sufficiently similar such that a two year restriction is warranted.
As for undue burden on Boudreau, the second part of New Hampshire's three part test for restrictive covenants, Wax Specialists' legal campaign has already cost her one job. An absence of an injunction would likely prevent Boudreau from accepting the current position that she is apparently able to begin on July 1, 2020. Moreover, Boudreau points out that the five mile radius encompasses more than 60 other potential employers. As she has a young child and her wages are used to support her family, the Court finds that Boudreau would suffer undue harm in the absence of injunctive relief.
And as for the public interest, the third part of the test, public interest supports the issuance of an injunction that will allow her customers to meet with the esthetician of her choice. The work of an esthetician is presumably very personal in nature. The public has an interest in enabling customers of the services provided by Wax Specialists and Boudreau to see the provider of their choice. Wax Specialists has not articulated a sufficient interest in restricting competition to overcome this interest.
In sum, Wax Specialists has not advanced a legitimate business interest for this restriction and therefore it is unenforceable under New Hampshire law. Alternatively, the 2018 and 2019 Agreements are excessive in geographic scope and temporal scope, respectively. Overall, the Court concludes that the three competition agreements are more driven by the goal of deterring Boudreau (and other Wax Specialist employees) from leaving Wax Specialists and competing with the company than supporting a legitimate business interest. Accordingly, the Court finds that Boudreau has established a likelihood of success (and correspondingly that Wax Specialists has not). The Court also finds that she would suffer irreparable harm for the same reasons that she would suffer undue burden from enforcement of the restrictive covenants and also that the public interest weighs against an injunction, again for the reasons previously stated.
As to this latter infirmity with respect to scope, New Hampshire law would allow reformation of the agreements if Wax Specialties can show that it acted in good faith. Boudreau, however, maintains that she was handed three non-competition agreements after her employment had commenced and with no option other than to sign the agreements. The first agreement was provided to Boudreau either on her first day of employment or a week after she began employment. Either way, she was not notified of the obligation to sign the agreement until after her acceptance of employment. Although Wax Specialists did not wait the six months that the employer in Merrimack Valley waited, Boudreau had already started her job when she was told she had to execute a non-competition agreement. Under New Hampshire law, the Court cannot find that the first agreement was the product of good faith.
The 2018 and 2019 Agreements are at least somewhat tainted by the first agreement. There is no evidence that Wax Specialists informed Boudreau that the first agreement was unenforceable before requiring her to sign the second and third agreements, an omission that may have affected her decision to sign the latter agreements. Moreover, as discussed above, the second and third agreements are overreaching in a number of respects. Although the 20 mile provision and two year duration are two examples, most glaring is the foregoing proposed arrangement under which in exchange for mandatory training, Boudreau is barred from competing in Manchester for two years and must also repay the cost of the training. For all of these reasons and at this preliminary stage, the Court could not find that Wax Specialists has met its burden of showing that it acted in good faith and thus the Court would not blue pencil the agreements even if they were found to be supported by a legitimate business interest.
Conclusion
For the foregoing reasons, Boudreau's motion for a preliminary injunction is GRANTED. Wax Specialties is enjoined from enforcing or attempting to enforce the non-competition provisions or the customer non-solicitation provisions in the 2016 Agreement, the 2018 Agreement and the 2019 Agreement or otherwise interfering with Boudreau's employment relationships. No bond is required.
Wax Specialists' motion for a preliminary injunction is DENIED. So Ordered. June 30, 2020
Date
/s/_________
Judge David A. Anderson
Clerk's Notice of Decision Document Sent to Parties on 06/30/2020