When the Men’s Room changed Kristi Wright’s compensation from commission-based to hourly pay, even though she could still earn bonuses, she saw it as a virtual pay cut.
Wright had been working since 2015 at the upscale Brighton day spa for men, where clients can enjoy services like a $70 back scrub or a $90 facial as well as haircuts and straight-razor shaves.
Apparently good at her job, Wright, who signed on as an apprentice stylist, was repeatedly promoted over the next three and a half years. By the time she quit last fall, Wright had attained the title of executive grooming specialist and had developed a following of loyal clients.
Still, dissatisfied with her new compensation arrangement, Wright quit the Men’s Room to take a job at Stache Grooming Lounge, a Men’s Room competitor whose compensation arrangements were more to her liking.
Before very long, Wright found herself at the center of a hot-button issue that has increasingly come to fore as non-compete and non-disclosure pacts have filtered down from the ranks of executives and managers to the realm of rank-and-file workers.
Taking it to court
In December, some three months after Wright started working at Stache, the Men’s Room slapped Wright and her new employer with a court complaint.
The salon and Wright are in violation of non-compete and non-disclosure agreements Wright inked some three years before she quit, the Men’s Room alleges. For those breaches, the Men’s Room claims, Wright and her new employer must be compelled to end their association, be made to pay the Men’s Room damages of $151,000, and cover the salon’s legal bills.
Wright has no plans to quit Stache, wrote her attorney, Edward Hourihan Jr., in a letter to Men’s Room attorney Jared Hirt of Evans Fox LLP. The “alleged non-competition agreement she may have signed after she was hired” is unenforceable, maintained Hourihan, managing member of Bond, Schoeneck & King PLLC’s Rochester office.
Much of what the Men’s Room claims concerning Wright and the agreement she signed is undeniably true. Still, its case might be less of a slam dunk than it appears to be. Nationally, cases like Wright’s that seek to bind relatively low-wage, low-tech workers to restrictive NDAs and non-competes have not gone well for employers.
NDAs and non-competes have long been employed by companies seeking to protect proprietary information or processes and to discourage competitors from poaching key employees.
Once only the highest echelon executive-suite occupants or employees with intimate knowledge of closely guarded secret processes like Coca Cola’s famed secret recipe were asked to sign such pacts. But in recent years, NDAs and non-competes have been used with workers in the low and middle ranges whose contributions are far less unique. While employers like the Men’s Room still deploy such agreements, the trend has met with some resistance.
In a 2018 Brookings Institution study, authors Alan Kreuger and Eric Posner identify deployment of non-competes to bind workers to low-wage jobs as contributing to growing U.S. income inequality.
Noting that 20 percent of low-wage workers with a high school education or less have signed non-competes, the authors concluded that “firms use non-compete agreements to suppress labor market competition among low-wage workers.”
That view has been gaining currency.
In 2015, Sens. Elizabeth Warren, D-Mass., and Chris Murphy, D-Conn., introduced the Mobility and Opportunity for Vulnerable Employees Act, a bill that would bar employers from binding low-wage workers to non-compete agreements. The law has not yet passed. But in 2019, Sen. Marco Rubio, R-Fla., introduced similar legislation from the other side of the aisle.
Even before such legislation was contemplated, courts in states including New Hampshire, Maryland, Rhode Island, Delaware and Michigan had moved to curb low-wage non-competes, a National Law Review article noted last March.
New York’s perspective
New York also has taken a dim view of such pacts.
In 2018, Attorney General Barbara Underwood, as a cap to an investigation that began in Illinois, announced a settlement with the shared office-space firm WeWork Cos. Inc., under which WeWork agreed to release several thousand low-wage workers such as cleaners from non-competes it had required them to sign.
Two years earlier, Jimmy John’s Gourmet Sandwiches, a fast-food chain with more than 2,000 locations, stopped giving franchisees non-competes under pressure from then Attorney General Eric Schneiderman. Jimmy John’s had supplied franchisees with non-compete pact templates they could use to keep their sandwich makers and delivery drivers, who on average make $6 to $15 an hour, from jumping ship for higher pay.
In the same year, Schneiderman also settled non-compete cases with the legal-news publication Law360 and the medical information firm Examination Management Services Inc.
A division of LexisNexis, Law360 had required all of its reporters, editors and even entry-level news assistants to sign pacts forbidding them from working for any publication that reported on legal news for one year after leaving. According to Glassdoor, Law360 reporters make $47,000 to $66,000 a year. Editors’ annual pay ranges from $45,000 to $53,000.
Texas-based EMSI had required all of its workers to sign non-competes forbidding them from working for any EMSI competitor within a 50-mile radius of any location where they had worked as an EMSI employee for nine months after leaving. The aggrieved ex-EMSI worker whose complaint sparked an investigation was a phlebotomist who traveled to various far-flung locations to draw blood and thus could work virtually nowhere in the state. The settlement applied only to New York employees.
Terms of the settlements that firms agreed to with Schneiderman and Underwood allow the companies to require top executives to ink NDA and non-compete agreements.
The Men’s Room case
The NDA and non-compete agreement Wright signed on Jan. 1, 2016, forbids her from working for any Men’s Room competitor within a three-mile radius of the Men’s Room’s Monroe Avenue salon for a period of one year after leaving the company. It also prohibits Wright from soliciting Men’s Room clients if she quits and barred her from associating with Men’s Room clients while she employed by the salon. The pact specifically forbids “association through any social media platform including but not limited to Facebook, LinkedIn, Instagram, Twitter, Snapchat, etc.”
In addition to violating the non-compete by working for a competitor located less than two miles from the Men’s Room’s Monroe Avenue salon, “Wright directly contacted numerous (Men’s Room) clients and induced (or) attempted to induce each of those clients to cancel his business with (the Men’s Room) and become a client of Stache,” the Men’s Room’s court complaint charges.
The defense Hourihan outlines in the letter to Hirt does not deny those charges but instead attacks the NDA and non-compete as an invalid exercise foisted on a vulnerable worker.
“Wright was an at-will employee for her entire tenure at The Men’s Room and, therefore, is not currently bound by the alleged employment contract. She was hired before she signed the alleged employment contract, which contained the alleged noncompetition agreement, and her compensation was changed unilaterally,” Hourihan argues.
What’s more, he adds, since the only similar local establishments to the Men’s Room are located within a three-mile radius of Wright’s former employer, the pact effectively and unfairly bars her from working in her chosen profession.
To bolster his case, Hourihan cites a recent decision in a similar local case in which former state Supreme Court Commercial Division Justice Matthew Rosenbaum turned down a hair salon’s bid for a court order preventing one of its former employees from working at a rival establishment.
Like the Men’s Room, Pharaoh’s Hairum, a West Henrietta Road salon and spa, is attempting to enforce a non-compete inked with a former employee. The Pharaoh’s Hairum pact restricts former employees from working for competitors within a 10-mile radius.
Citing the hair salon’s failure to compellingly demonstrate a likelihood of success in pressing its case among reasons for turning down its bid to stop its ex-employee from working elsewhere, Rosenbaum also took into account the circumstances under which the worker signed the non-compete.
“Defendant is a twenty-three-year old hairstylist who signed an employment agreement with plaintiff on July 29, 2014 14 days after turning 18 years old, and a month and a half after graduation. She was advised that signing the agreement was a condition of employment, and she was not provided an opportunity to review it with counsel,” the judge wrote.
At the time she inked the non-compete, Rosenbaum added, the hair stylist was an $8-an-hour trainee, and the conditions she agreed to were “not bargained for, nor offered as a promotion or higher level of responsibility.”
Will Astor is Rochester Beacon senior writer.
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