Commentary | A noncompete agreement leaves an esthetician forbidden from working in her field, collecting food stamps and representing herself in a $100,000 lawsuit against corporate lawyers.
Maxie Foster spent years as a receptionist before paying her way through beauty school to earn an esthetician license and start a career where she could earn more money and better support her daughter.
Her first job after graduation was at a Massage Envy franchise, where she spent more than two years in an entry-level position earning a reputation as a hard worker. But when she got a better-paying job at another massage and beauty store, the owners of the million-dollar franchise launched a legal battle that has left Foster forbidden from working in her field, collecting food stamps and representing herself in a $100,000 lawsuit against corporate lawyers.
“I went from renting my own house to living in a trailer on my parents’ property at 27 years old,” Foster told me.
David Ward is an attorney representing FBE Ventures, which owns the Massage Envy franchises where Foster worked in Conroe and Tomball, Texas. He did not respond to email or phone messages seeking comment about the ongoing legal battle.
Foster is one of millions of Americans who have signed employment contracts with noncompete agreements that they probably didn’t understand. They are locked into low-paying jobs until they can make enough money to move to another city or can suspend their careers for a year to let the noncompete run out.
Companies originally came up with noncompetes to keep researchers and top executives from stealing trade secrets, but now, across the country, employers now use them to deny employees opportunities to seek other jobs. The agreements discourage innovation and competition, granting some companies local monopolies that hurt consumers.
“Approximately 15 percent of workers without a college degree are currently subject to noncompete agreements, and 14 percent of individuals earning less than $40,000 are subject to them,” according to researchers at the University of Maryland and the University of Michigan. “We also show that employees rarely report negotiating over noncompetes, and that noncompetes are associated with no wage premium at signing.”
Foster said she never expected FBE Ventures to stop her from getting a better job. The company did not pay for her esthetician training or license, nor did it grant her access to trade secrets or equity in the company.
The first sign of trouble came when she started at Massage Heights, which was opening a location in Conroe. Foster and the Massage Heights franchise owner received cease-and-desist letters in December ordering Foster to stop working. But since she had not brought any FBE Ventures clients or employees with her, they ignored the letters.
A few days after the store opened, though, Foster and the franchise holder were served with a lawsuit. Massage Heights fired Foster to settle the lawsuit the week before Christmas. FBE Ventures is still suing Foster.
Since she works on commission, Foster can’t afford an attorney, and legal aid groups don’t take noncompete cases. She went to the first hearing hoping for mercy from the judge but ended up with a temporary injunction preventing her from working in her field within 40 miles of her home in Magnolia.
“You’d think I’d murdered somebody. They came in with two corporate attorneys and tore me apart. Everything I did, like me hitting a ‘like’ button on Facebook, turned into me trying to recruit their employees,” Foster said. “After I quit, some of their clients canceled memberships, and they tried to say I was contacting clients. In reality, out of the hundreds of clients I saw over the years, I had one who contacted me via social media to ask where I was.”
Ward, the attorney representing FBE Ventures, told the judge that FBE Ventures needed to make an example of Foster, according to Foster.
“In the initial hearing, they made a comment that since I quit they’ve had other people quit, and they are hiring private investigators to make sure they are not going to work for the competition,” Foster said. “They are blaming all of that on me, because the other employees saw me leave.”
In their court filing, FBE Ventures complains that Massage Heights often follows Massage Envy into new markets and takes away business. But it does not explain why that’s anything more than everyday capitalism, or why using the courts to starve Massage Heights of employees doesn’t constitute an unfair restraint on trade.
Joe Ahmad, an attorney specializing in executive employment law, says he regularly defends his high-income clients against overreaching noncompetes, but there is a gap when it comes to low-income workers.
“My guess is that the noncompete can be attacked because the employee is not getting confidential information, specialized training or equity, but she does not have the capacity to fight back,” Ahmad said. “It’s unlikely it will be thrown out for someone who can’t afford an advocate who can articulate why it should be thrown out. It’s a horrible gap that has existed, and you see some employers exploiting that gap.”
Ahmad said companies routinely expect employees to sign noncompetes that overreach.
“I understand it when it’s an executive who has access to the company’s most valuable secrets, but I don’t understand it for an esthetician,” he said. “Noncompetes have their place, but we know they are being overused.”
Since Texas law is relatively silent, the Texas Supreme Court has ruled in recent years that judges should not interfere in contracts between companies and employees, encouraging employers to use noncompetes more, Ahmad said. Nationally, the number of noncompete lawsuits filed against employees has risen 61 percent between 2002 and 2013, according to the Washington law firm Beck Reed Riden.
Legislation to restrict noncompetes in Washington state stalled in Olympia earlier this year. Some states, though, have passed laws making noncompetes unenforceable, including Oklahoma and North Dakota.
California, home to Silicon Valley, only allows noncompetes under special circumstances. That’s because California lawmakers understand that noncompetes inhibit creation of the proverbial “better mousetrap,” the kind of innovation and competition that keeps a free market economy healthy.
In Texas, though, noncompetes have become an abhorrent tactic to lock low-wage workers into jobs with no future. They allow companies like FBE Ventures to avoid paying competitive wages when the labor market gets tight because workers can’t quit without leaving their field.
Foster’s case is scheduled for mediation, and FBE Ventures has proposed a settlement that would enforce the noncompete and drop claims for damages and legal fees as long as Foster and her parents promise to never publicly discuss the lawsuit.
Foster says there is no way she’s signing away any more of her rights.
“I don’t want this to happen to someone else. I’ve been fortunate that my parents have a business, and they can say, ‘Come work for me,'” she said. “If it weren’t for my parents, we’d be homeless.”
Isn’t she afraid talking to the Chronicle will anger FBE Ventures and result in a financial judgment against her?
“There’s no money, none. I’ve got $8 in my bank account,” she said. Spreading the word about the dangers of noncompetes is more important, she added.
Until the Legislature or Congress ban these improper restraints on trade that deny Texans their liberty, employees need to beware of noncompete agreements, and the companies that require them. Don’t let a company steal your future just to get a job.
Chris Tomlinson writes a twice-weekly column on business, energy and economics for the Houston Chronicle.