Non-Compete Agreements for Tattoo and Piercing Studios [Legal Link]

QUESTION: I’ve only been tattooing about a year and now have an opportunity to work for a tattoo studio with a great reputation, where I can learn a lot from the owner and principal tattooist. The problem is that before he hires me, I have to sign a non-compete agreement that says I can’t tattoo in the city where the shop is for at least five years if I decide to leave. Is this legal? I really want to work there but I don’t want to get screwed. What do you think?

Non-compete or non-competition agreements are contracts that can be used to protect owners of tattoo shops from unfair competition, particularly in keeping trade secrets and customers. The other way of looking at it is that it restricts artists from tattooing after they have left a studio and puts restraints on making a living. Either way you see it, the bottom line is the bottom line. For studio owners, it can take years of hard work and expense to build up a clientele and strong reputation, and many want to protect that investment. For the artists that work there, it can hold them back from breaking out on their own and being their own boss, or from working and learning from another tattooist. But these non-compete agreements also work in favor for employee artists. If the owners feel protected, then they may be more willing to hire and train others, divulging tricks of the trade to see their employees grow and achieve their own fine reputations. They are less likely to do so if they fear that fine reputation will open shop across the street from them.

The fundamental problem of a non-compete agreement arises when it is drafted in a way that is overly broad and restrictive. In such cases, the agreement may not be enforced. Yet, what is deemed fair and enforceable is different from state to state. For example, California has banned covenants not to compete, and only allows those agreements not to compete when business owners sell their businesses to new owners. Colorado and North Dakota also ban non-compete agreements. As for the other states, there are few straight answers – it’s mostly grey shading.

There are, however, general criteria that courts will use to determine whether a non-compete clause is enforceable.

1. Is the non-compete agreement reasonably necessary to protect the employer’s legitimate business interest?
2. Is the agreement unreasonably restrictive of the employee’s rights?
3. Is the agreement against public policy?

How the courts come down on these criteria largely depends on the facts of each case.

The courts have found a legitimate business interest to exist where the employer taught the employee special knowledge or skills that could be used once the employee left the business and at the employer’s expense. So, say, the owner of tattoo shop showed her employee tattooist how to make special needle bars, mix colors for special effects, or certain signature shading techniques, the courts could find that the owner had a legitimate interest in protecting her trade secrets, especially because many choose a tattooist based on their techniques and skill and not on marketing ploys and free gifts. An owner’s near permanent relationship with clients could also be deemed a legitimate business interest depending on the length of time, investment, and continuity in that client relationship. Think about how often one hears, “I will only be tattooed by that artist [or studio]” and it is easy to make that connection. Some reputations of employee artists can be enhanced by mere affiliation with a Master Tattooist. Should the Master Tattooist then suffer, without compensation, the loss of his or her clients when an employee banks on the studio’s rep and competes against it?

Before you answer, what if you consider that the employee tattooist slaved away for years for the Master Tattooist at a low percentage or salary and then was barred from tattooing in that city for ten years? In deciding whether a non-compete agreement is fair or unreasonably restrictive of an employee’s rights, the main factors for the courts are geographic scope and time. Geographic restrictions must be related to the area where business is being conducted. Yet again, it all depends on what the courts deem a reasonable restriction in light of the facts surrounding the case. One court deemed a limited radius around a business too restrictive while another court upheld a nation-wide restriction. If the agreement prohibits you from tattooing in your city, then the courts may look to whether you work in Manhattan or Back Woods, Wisconsin to determine reasonableness. Reasonableness also factors into time restrictions. One way to determine reasonableness is the amount of time it takes to attract and keep clients. For a machinery maintenance company, a five-year restriction was held to be reasonable but not for an Internet advertising company, where only six months was found to be a fair restriction.

Whether non-compete agreements get enforced all comes down to fairness, and, as in most things in life, it involves finding the right balance. Beyond time and geographic scope, courts have found it unfair that an employer only enforced a non-compete agreement with one employee but not others who left before him. Non-compete agreements have also been invalidated when an employee was fired without cause, that is without doing anything wrong, or was not reasonably compensated in exchange for signing the non-compete agreement. There’s also the issue of illegal conduct, where courts have refused to enforce the agreement when an employer engaged in misconduct, so as not to reward to unethical behavior. Thus, if the owner of the tattoo shop is inking minors or engaging in tax fraud, their restrictions on an employee’s right to work elsewhere may be null. In this case, a threat of bringing up the illegality in court may even avoid a law suit all together. Or get your nose broken.

The public policy criterion may not be a big issue for tattooists as opposed to, say, doctors. But you may get a progressive judge who will refuse to enforce a non-compete agreement in an effort to stimulate competition in an area and give the public a greater range of artists to chose from, especially so that one does not hold a monopoly over an area. [And finding a progressive judge for your district can just take a trip to the polls for local elections – but that’s a topic for a different article.]

After all the criteria have been weighed and it is found that a non-compete agreement is enforceable and that the employee has violated it, what does the employer get? In some cases, lots. The employer tattooist can seek money damages and seek an injunction to stop the ex-employee’s machines from buzzing. If the former employee is working for another studio, that studio may be forced to fire their new tattooist. If the studio does not comply, it may have to pay damages as well.

The loss can be great to the employee tattooist who violates a non-compete clause, and because of it, some unscrupulous owners of tattoo studios may try to hold their employees to unreasonable and overly broad agreements even when they know the agreements would not hold up in court. In such cases, particularly when the employers knew the contracts were unfair, the courts have made the employers pay the attorney fees of the wronged employee. [I consider awarding attorney fees to be the judicial equivalent of Karma.]

In tattoo Nirvana, there would be no need for lawyers and their hefty fees. The community feeling would persist throughout the ages and all would reap the rewards. If employers did draft contracts they would be fair, and employees would stick to their word and follow them. But true enlightenment is not so difficult, especially if you keep the following things in mind:

• Negotiate fairly. If owners of tattoo shops wish to protect their businesses from unfair competition from former employees, then those employees should be properly compensated for giving up their rights, whether it be in cash or training.
• Remember to keep time and geographic limitations short and reasonable.
• Decide on how to best handle working the same tattoo conventions. For many tattooists, this is not a big issue, but if it is, set out a fair agreement, such as working alternate years.

Most importantly, in any instance where you are going to draft or sign an agreement that can substantially affect your livelihood, contact a lawyer first. If you cannot afford one, at least do some research and talk to your state labor office (http://www.dol.gov/esa/contacts/state_of.htm) for free. If not, there’s always California.

Marisa Kakoulas

Marisa Kakoulas is a New York lawyer, writer, and muse of Daniel DiMattia of Calypso Tattoo, living in Liege, Belgium. She works undercover — or just covered up — as a corporate consultant: proof that tattoos and suits are not mutually exclusive. Her book “Tattoo Law”, an overview of US laws affecting the body modification community, is under way. IAM members can visit Marisa at iam:FREE.

Copyright © 2004 Marisa Kakoulas. Online presentation copyright © 2004 BMEzine.com LLC. Requests to republish must be confirmed in writing. For bibliographical purposes this article was first published online September 23, 2004 by BMEzine.com LLC in Toronto, Ontario, Canada.