Patricia Kennedy v. the Shave Barber Company, LLC , 822 S.E.2d 606 ( 2019 )

THIRD DIVISION
ELLINGTON, P. J.,
GOBEIL and COOMER, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
December 20, 2018
In the Court of Appeals of Georgia
A18A1660. PATRICIA KENNEDY v. THE SHAVE BARBER
COMPANY, LLC.
GOBEIL, Judge.
The Superior Court of Fulton County granted The Shave Barber Company,
LLC’s (“The Shave”) request for an interlocutory injunction against Patricia
Kennedy. The injunction restrains Kennedy from competing with The Shave and from
soliciting its customers and employees. Kennedy appeals, contending that the trial
court erred in applying Georgia’s Restrictive Covenants Act, OCGA § 13-8-50, et
seq. (the “Act”). Finding no error, we affirm the trial court’s findings related to the
restrictive covenants and its grant of an interlocutory injunction against Kennedy.
The record shows that in 2015, Kennedy began working as a master barber for
The Shave, a barbershop in Atlanta’s Virginia-Highland neighborhood that caters to
men and provides hair cutting, shaving, and other grooming-related services and
products. Kennedy and other employees of The Shave worked on a “commission
only” basis, and were paid a percentage of their sales of services and products. The
Shave’s primary connection to its customers is through its stylists and barbers, and
it uses social media to promote the business and individual barbers. While employed
at The Shave, Kennedy used various social media accounts to inform customers of her
schedules, promote products, and to show photographs of haircuts or services she had
provided to customers. Most of Kennedy’s social media posts were made on her
professional page titled “PK Does Hair.”
When Kennedy began her employment, she was classified as an independent
contractor. However, following the departure of two employees of The Shave, both
of whom opened competing barbershops in close proximity to The Shave,1 the
previous owner of The Shave required its stylists to sign employment contracts. In
October 2016, Kennedy signed an agreement (the “agreement”) which classified her
as an “employee” of The Shave and contained several restrictions on her post-
1
One such competing shop is located on Ponce de Leon Avenue, and the other
shop is located in Atlanta’s Kirkwood neighborhood.
2
employment activities.2 Under the terms of the contract, Kennedy agreed not to work
in the men’s grooming industry within a three-mile radius of The Shave for two years
after leaving her employment with The Shave (the “non-compete” provision); she
also agreed not to solicit customers or employees of The Shave for one year after
leaving her employment. Specifically, the agreement provided:
7. As part of the consideration for making this Agreement and in
consideration of continued employment, for a period of one (1) year
after termination of employment with THE SHAVE, Employee shall
refrain from (i) interfering with or soliciting or attempting to solicit, for
any business in the barber, salon[,] or men’s grooming industry, any
customer or potential customer of THE SHAVE with whom Employee
had any personal contact or learned of or was introduced to during the
term hereof and (ii) recruiting or soliciting or attempting to recruit or
solicit any employee or agent of THE SHAVE for any business in the
barber, salon[,] or men’s grooming industry within a three (3) mile
radius of THE SHAVE . . .
8. For a period of two (2) years after termination of employment with
THE SHAVE, Employee shall not directly or indirectly compete with
THE SHAVE by owning, managing, operating, representing, promoting,
selling for, soliciting for, consulting for, controlling, or participating in
2
The parties do not dispute that Kennedy and The Shave entered into the
agreement, and, for purposes of this appeal, we will therefore assume that Kennedy
was an employee of The Shave and not an independent contractor.
3
the ownership, operation, acquisition, or management of a business
selling or providing [] services the same or similar to that provided by
THE SHAVE within a three (3) mile radius of any SHAVE location. .
..
As part of the agreement, Kennedy acknowledged that she would “be customarily and
regularly soliciting for THE SHAVE customers or prospective customers.” The
parties also agreed that, in the event of a breach or threatened breach, “the
ascertainment of damages . . . would be difficult” and that The Shave “shall have the
right to injunctive relief or other similar remedy in order to specifically enforce the
provisions” of the agreement.
Kennedy resigned her position at The Shave in December 2017. She announced
her last day of work for The Shave via social media by posting a photo of her work
station; by tagging The Shave, this posted announcement appeared on The Shave’s
social media accounts. Brian Harn, The Shave’s owner, discovered that Kennedy
planned to open a new salon within three miles of The Shave, and he informed her
that doing so would violate the agreement. Kennedy acknowledged that her new salon
was located within three miles of The Shave, but she informed Harn that she would
be faced with financial ruin if she were unable to open her new business as planned.
Kennedy opened her salon, “PK Does Hair,” on January 4, 2018. The new salon’s
4
location is 2.1 miles from The Shave. She continued using her “PK Does Hair” social
media accounts to solicit customers, and she re-posted photos taken at The Shave of
its customers and tagged these customers in the posts.3 On January 23, 2018, in a
video posted to her personal Facebook page, Kennedy stated that “being your own
boss is great” and referenced a then-current employee of The Shave by name.
Thereafter, on January 24, 2018, The Shave sued Kennedy for damages and
injunctive relief, claiming she breached the terms of the employment contract. The
Shave sought an interlocutory injunction pending a full adjudication on the merits of
its underlying claims.4 Kennedy challenged the enforceability of the contract,
counterclaimed for violations under the Fair Labor Standards Act (29 USC § 216 (b)),
and sought overtime compensation. On February 5, 2018, the trial court held a
hearing on The Shave’s request for interlocutory injunction and heard testimony from
3
According to The Shave, Kennedy removed these tags when The Shave
initiated legal action against her.
4
The trial court and the parties used the terms “temporary restraining order” and
“interlocutory injunction” in referring to the order now on appeal. We note that the
this appeal does not involve a temporary restraining order because the trial court’s
order was issued after an adversarial hearing and does not expire within 30 days. See
OCGA § 9-11-65 (b) (“A temporary restraining order may be granted without written
or oral notice to the adverse party or his attorney . . . and shall expire by its terms
within such time after entry, not to exceed 30 days . . .”).
5
Harn and Kennedy. On February 26, 2018, the trial court found the agreement’s
restrictive covenants reasonable and enforceable and granted The Shave’s motion for
an interlocutory injunction, enjoining Kennedy from
owning, operating, promoting, selling for, soliciting for, consulting for,
controlling or participating in the ownership, operation, or management
of a business selling or providing the services the same or similar to that
provided by The Shave within a three-mile radius of The Shave . . . .
interfering with or soliciting or attempting to solicit . . . any customer or
potential customer of The Shave with whom [Kennedy] had any
personal or material contact . . . .
recruiting or soliciting or attempting to recruit or solicit any employee
or agent of The Shave . . . .
The trial court limited the geographic scope of the non-compete restriction to within
a three-mile radius of The Shave’s current location in the Virginia-Highland
neighborhood. Kennedy now appeals, arguing that the trial court erred in granting
injunctive relief.
6
Applying to employment agreements entered into after May 11, 2011, the Act
governs the restrictive covenants in this case.5 In the Act, the General Assembly
recognizes that “reasonable restrictive covenants contained in employment and
commercial contracts serve the legitimate purpose of protecting legitimate business
interests . . . .” OCGA § 13-8-50. Further, the General Assembly expressed its intent
“to provide statutory guidance so that all parties to such agreements may be certain
of the validity and enforceability of such provisions and may know their rights and
duties according to such provisions.” Id. We are also mindful that the Act requires a
court’s construction of a restrictive covenant “to comport with the reasonable intent
and expectations of the parties to the covenant and in favor of providing reasonable
protection to all legitimate business interests established by the person seeking
enforcement.” OCGA § 13-8-54 (a).
5
Prior to 2011, Georgia’s constitution forbade the General Assembly from
authorizing restrictive covenants, and such covenants were disfavored under Georgia
law. See Burson v. Milton Hall Surgical Associates, LLC, 343 Ga. App. 159, 161 (806
SE2d 239) (2017). A constitutional amendment, approved and ratified in 2010,
empowered the General Assembly to enact laws authorizing and regulating restrictive
covenants in employment contracts. Ga. Const. of 1983, Art. III, Sec. VI, Par. V (c)
(2) and (3). The General Assembly exercised that authority and enacted OCGA §13-
8-50 et seq. in 2011. Ga. L. 2011, p. 399, § 4.
7
Regarding a trial court’s decision to issue an interlocutory injunction, our
Supreme Court has held that
[a]n interlocutory injunction is an extraordinary remedy, and the power
to grant it must be prudently and cautiously exercised. However, to be
effective, the decision to grant an interlocutory injunction must often be
made under time constraints that do not allow for the careful
deliberation and reflection that accompany a full trial on the merits.
Thus, the trial court must make a judgment call regarding the equities
presented, and the court is vested with broad discretion in making that
decision. . . . The grant or denial of an interlocutory injunction will not
be reversed on appeal unless the trial court made an error of law that
contributed to the decision, there was no evidence on an element
essential to relief, or the court manifestly abused its discretion.
City of Waycross v. Pierce County Board of Commissioners, 300 Ga. 109, 110-111
(1) (793 SE2d 389) (2016) (citations and punctuation omitted). With these guiding
principles in mind, we now turn to Kennedy’s specific claims of error.
1. Kennedy first argues that the trial court erred in granting The Shave an
interlocutory injunction with respect to the non-compete provision of the agreement.
Specifically, Kennedy asserts that The Shave failed to demonstrate a substantial
likelihood of success at trial on the merits of the non-compete provision because (a)
the non-compete is unenforceable against Kennedy; (b) the geographic restriction in
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the agreement’s non-compete provision is excessive; (c) The Shave failed to
demonstrate a legitimate business interest justifying the non-compete provision; and
(d) the scope of activities prohibited by the non-compete provision is unreasonable.
(a) Kennedy argues that she was not the type of employee subject to
competition restrictions under the Act. We disagree.
Pursuant to the Act, restrictive covenants in employment contracts are
permitted and enforceable if they are reasonable in time, geographic area, and scope
of prohibited activities. OCGA § 13-8-53 (a). Even if a covenant not to compete is
reasonable in these respects, its applicability is limited to employees who customarily
and regularly solicit customers, customarily and regularly sell products or services,
or have defined managerial, key employee, or professional duties. OCGA § 13-8-53
(a) (1), (2), (3), and (4).
In determining which types of workers may be subject to covenants not to
compete, the Act defines an “employee” as including any “person or entity, including
an independent contractor, in possession of selective or specialized skills, learning,
or abilities or customer contacts, customer information, or confidential information
. . .” OCGA § 13-8-51 (5) (C). In relevant part, the Act permits the enforcement of
post-employment non-compete provisions against employees who “[c]ustomarily and
9
regularly solicit for the employer customers or prospective customers.” OCGA § 13-
8-53 (a) (1).
As part of her employment contract, Kennedy expressly agreed to customarily
and regularly solicit customers or potential customers for The Shave. The record
contains evidence that Kennedy had direct, extensive contact with customers and that
she customarily and regularly solicited customers on behalf of The Shave. In finding
that Kennedy was subject to the Act, the trial court considered evidence that Kennedy
regularly posted her work schedule and a link to The Shave’s website to her social
media accounts, encouraged clients and potential clients to patronize The Shave,
posted photographs of services she provided at The Shave, and directly mentioned,
linked, or tagged The Shave in these posts. On average, Kennedy provided haircuts
and other grooming services to 230 repeat customers per month. Harn averred that
“once a customer leaves and goes somewhere else for its hair grooming needs, it is
unlikely for that customer to return to The Shave.” Kennedy developed close
relationships with several of her clients, and there was evidence that The Shave
assisted Kennedy in developing these substantial relationships by expending
considerable resources in developing its name recognition and customer base. Based
on this evidence that Kennedy customarily and regularly solicited customers on
10
behalf of The Shave, the trial court did not abuse its discretion in finding that
Kennedy performed the types of duties that would classify her as an employee and
subject her to the Act pursuant to OCGA § 13-8-53 (a) (1).
(b) Kennedy argues that the trial court erred in finding the non-compete
provision of the agreement enforceable because that provision contained an
unreasonable and uncertain geographic restriction. We discern no error.
Under OCGA § 13-8-53 (c) (2), language describing a geographic restriction
in a non-compete provision of an employment contract is sufficient “if the person or
entity bound by the restraint can reasonably determine the maximum reasonable scope
of the restraint at the time of the termination.” The Code further provides certain
presumptions regarding the reasonableness of a geographic restriction:
In determining the reasonableness of a restrictive covenant that limits or
restricts competition during or after the term of an employment or
business relationship, the court shall make the following presumptions:
. . . A geographic territory which includes the areas in which the
employer does business at any time during the parties’ relationship, even
if not known at the time of entry into the restrictive covenant, is
reasonable provided that: (A) The total distance encompassed by the
provisions of the covenant also is reasonable . . .
11
OCGA § 13-8-56 (2) (A). In determining whether a particular restriction is
reasonable, OCGA 13-8-53 (c) (1) provides that “[w]herever a description of
activities, products, and services, or geographic areas, is required by this Code
section, any description that provides fair notice of the maximum reasonable scope
of the restraint shall satisfy such requirement . . . .” Additionally, the statute permits
a court to modify, or “blue pencil,” a covenant that “is otherwise void and
unenforceable so long as the modification does not render the covenant more
restrictive with regard to the employee than as originally drafted by the parties.”
OCGA § 13-8-53 (d); see also OCGA § 13-8-54 (b) (providing that, “if a court finds
that a contractually specified restraint does not comply with [OCGA § 13-8-53], then
the court may modify the restraint provision and grant only the relief reasonably
necessary to protect such interest or interests and to achieve the original intent of the
contracting parties to the extent possible”).
Here, there was evidence that most of The Shave’s customers live and work
within three miles of its Virginia-Highland location. There was also evidence that The
Shave lost customers and that its business suffered when two former employees of
The Shave opened competing barbershops within three miles of The Shave. Based on
the limited territorial restriction involved in the non-compete covenant, and the
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demonstrated harm if the covenant is not enforced, we find the geographic limitation
in this case to be reasonable6 and that Kennedy had fair notice of this restriction.
Further, although The Shave currently operates only one location and has no
immediate plans to open other locations, the trial court eliminated any uncertainty in
the geographic scope of the non-compete by limiting the restricted area to a three-
mile radius surrounding The Shave’s current location. Because the three-mile radius
as modified by the trial court is reasonable under the facts of this case, we find no
error.
(c) Kennedy argues that The Shave failed to show that it had a legitimate
business interest justifying the extent of the non-compete provision. We disagree.
Under the Act, “[t]he person seeking enforcement of a restrictive covenant
shall plead and prove the existence of one or more legitimate business interests
justifying the restrictive covenant.” OCGA § 13-8-55. Legitimate business interests
6
Prior to the enactment of OCGA § 13-8-50 et seq., this Court upheld and
enforced covenants that were more restrictive than the three-mile radius covered by
the non-compete provision in the agreement in the instant case. See, e.g., McAlpin v.
Coweta Fayette Surgical Assocs., P.C., 217 Ga. App. 669, 672 (2) (458 SE2d 499)
(1995) (no practice of medicine or surgery for two years in ten county area, including
part of Atlanta); Moore v. Preferred Research, 191 Ga. App. 26, 29 (2) (381 SE2d
72) (1989) (restriction encompassing 25-mile radius of any of employer’s places of
business held to be reasonable).
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include, but are not limited to, “[s]ubstantial relationships with specific prospective
or existing customers . . . or clients” and “client good will.” OCGA § 13-8-51 (9) (C)
and (D). In its request for an interlocutory injunction, The Shave asserted that it
sought enforcement of the agreement to prevent the loss of “significant customer
goodwill.”
The trial court found that The Shave’s non-compete provision was supported
by legitimate business interests in that it had devoted considerable resources to
developing its name recognition and customer base. Under the plain language of the
Act, The Shave had a legitimate business interest in protecting itself from the risk that
Kennedy might appropriate customers by taking advantage of the contacts developed
while she worked at The Shave.
(d) Kennedy argues that the non-compete provision is unreasonable in the
scope of prohibited activities. Contrary to Kennedy’s assertions, we disagree that the
terms of the non-compete clause bar her from working for any competitor in any
capacity.
The non-compete clause precludes Kennedy from selling men’s grooming
services and products within a three-mile radius of The Shave only if, in so doing, she
competed with The Shave. Specifically, the agreement bars Kennedy from competing
14
with The Shave by working for a competitor “selling or providing the services the
same or similar to that provided by The Shave . . .” The agreement does not preclude
Kennedy from working at a retail establishment that sells hair care or grooming
products (but does not provide styling services) within a three-mile radius of The
Shave, nor does it preclude her from working as a stylist outside of the territorial
restriction. The trial court did not err in finding the agreement’s scope of prohibited
activities to be reasonable under the circumstances.
Here, the evidence strongly suggests Kennedy is in violation of several of the
restrictive covenants which where specifically designed to protect The Shave from
competition from its former employees and loss of its client base. Therefore, the trial
court did not err in finding the non-compete enforceable against Kennedy and in
granting interlocutory relief on this ground.
2. Kennedy next argues that the trial court erred by finding that The Shave
demonstrated a substantial likelihood of success on the merits of its customer non-
solicitation claim. Specifically, Kennedy contends The Shave did not provide a
legitimate business interest justifying the customer non-solicitation covenant, and she
further asserts that “using her social media accounts to post pictures of her work” and
15
“tagging The Shave’s customers in pictures” posted to her social media accounts does
not constitute solicitation.
The merits of a claim may be considered when ruling on injunctive relief:
Although the merits of the case are not controlling, they nevertheless are
proper criteria for the trial court to consider in balancing the equities. If
the trial court determines that the law and facts are so adverse to a
plaintiff’s position that a final order in his favor is unlikely, it may be
justified in denying the temporary injunction because of the
inconvenience and harm to the defendant if the injunction were granted.
Thus, in determining whether the equities favor one party or the other,
a trial court may look to the final hearing and contemplate the results.
R.D. Brown Contractors, Inc. v. Bd. of Ed. of Columbia County, 280 Ga. 210, 212
(626 SE2d 471) (2006) (citation, punctuation, and emphasis omitted).
Pursuant to OCGA § 13-8-53 (b), an employee may agree
to refrain, for a stated period of time following termination, from
soliciting, or attempting to solicit, directly or by assisting others, any
business from [the] employer’s customers, including actively seeking
prospective customers, with whom the employee had material contact
during his or her employment for purposes of providing products or
services that are competitive with those provided by the employer’s
business.
16
OCGA 13-8-53 (b). The evidence authorized a finding that many of Kennedy’s social
media posts constituted customer solicitation. The trial court heard evidence that
Kennedy was attempting to solicit clients with whom she had material contact during
her employment with The Shave and that she met these clients as a direct result of her
employment with The Shave.7 The trial court did not abuse its discretion in finding
that these targeted posts and tags constituted solicitation and in enjoining Kennedy
from soliciting The Shave’s customers within the reasonable limitations provided in
the agreement.8
7
For example, Kennedy tagged The Shave in a post announcing her final day
of work, thereby informing followers of the page, including The Shave’s customers,
that she intended to open her own salon. Using the same social media accounts she
had previously used to solicit customers on behalf of The Shave, Kennedy posted
photos of The Shave’s customers that were taken at The Shave and in which The
Shave’s branding is clearly visible and tagged the customers in these posts. Twelve
days after her resignation, Kennedy implored existing clients to refer new clients in
order to receive discounts. The trial court was authorized to find that the purpose of
these social media posts and communications was to inform Kennedy’s former clients
that she was opening a new salon and to solicit their business.
8
We are not deciding whether unsolicited content or posts of a personal nature
on an individual’s social media accounts can constitute solicitation. Several of the
posts and tags at issue here, however, were sufficient to warrant the trial court’s grant
of an injunction because they were directly related to Kennedy’s new business
venture and directed at The Shave’s customers.
17
3. Kennedy argues that the trial court erred by finding that The Shave
demonstrated a substantial likelihood of success at trial on the merits of its employee
non-solicitation claim. Specifically, Kennedy contends that the record is devoid of
any evidence that she violated the employee non-solicitation covenant. We disagree.
Harn averred that The Shave faced immediate and irreparable harm due to
Kennedy’s attempts to influence employees to leave The Shave. The Shave presented
evidence, including the Facebook video naming one of The Shave’s employees, that
Kennedy’s actions constituted a potential breach of the employee non-solicitation
provision of the agreement. Given such evidence, we cannot find it was an abuse of
the trial court’s discretion to grant an interlocutory injunction protecting The Shave’s
interest in maintaining its workforce, pending a final adjudication on the merits.
4. Finally, Kennedy argues that the trial court erred by failing to give “proper
consideration” to the factors at issue in granting the non-compete interlocutory
injunction. Specifically, she asserts the trial court erred by failing to properly consider
the harm that she would suffer if the injunction were granted. We discern no error.
In deciding whether to issue an interlocutory injunction, the trial court
should consider whether: (1) there is a substantial threat that the moving
party will suffer irreparable injury if the injunction is not granted; (2) the
threatened injury to the moving party outweighs the threatened harm that
18
the injunction may do to the party being enjoined; (3) there is a
substantial likelihood that the moving party will prevail on the merits of
[its] claims at trial; and (4) granting the interlocutory injunction will not
disserve the public interest.
SRB Inv. Services, LLLP v. Branch Banking and Trust Co., 289 Ga. 1, 5 (3) (709
SE2d 267) (2011) (citation and punctuation omitted). This “four factor test . . . is a
balancing test and [] it is not incumbent on the movant to prove each factor.” City of
Waycross, 300 Ga. at 112 (1).
Kennedy claims she will face bankruptcy and financial ruin if the injunction
is upheld, and we are mindful that this harm is not insignificant. At the hearing below,
in acknowledging the potential harm Kennedy might sustain, the trial court remarked
that, “if we’re balancing harms, I haven’t heard that [T]he Shave is going to go out
of business if Ms. Kennedy stays where she is. I have heard that Ms. Kennedy might
well have to declare bankruptcy. That’s not going to jail, that’s not losing your right
arm, but it’s harmful if you’re planning on securing any credit in the near future.” The
trial court also inquired of Kennedy whether it would be feasible for her to work in
another location and earn money to help manage the lease payments.
Here, the trial court found Kennedy in violation of the agreement–an agreement
the trial court found provided fair notice of the maximum reasonable scope of the
19
non-compete restraint. Further, absent entry of an injunction, The Shave stood to lose
customer relationships and would suffer irreparable harm. In its order granting the
interlocutory injunction, the trial court expressly noted that “[w]hile the temporary
relief [The Shave] seeks will no doubt create hardships for [Kennedy], the ‘relative
equities’ favor [The Shave].” The trial court clearly and carefully weighed the harm
involved in issuing the interlocutory injunction, and we find no abuse of discretion
in the grant of injunctive relief. See Bijou Salon & Spa, LLC v. Kensington
Enterprises, Inc., 283 Ga. App. 857, 861 (643 SE2d 531) (2007) (no abuse of
discretion where trial court heard evidence on both sides of the issue and found that
the equities weighed in favor of the employer and that the status quo of not having
competition by former employee within the restricted area was preserved by issuance
of interlocutory injunction).
Accordingly, we affirm the trial courts finding that the restrictive covenants
were reasonable and affirm the grant of the interlocutory injunction.
Judgment affirmed. Ellington, P. J., and Coomer, J., concur.
20