(function ($, Drupal, window, document, undefined) {
Drupal.behaviors.my_custom_behavior = {
  attach: function(context, settings) {
/*------ Hide labels when user interacts with forms ------*/
    $(".form-item input", context).on({
      focus: function() {
        $(this).prev('label').fadeOut('fast');
      },
      keyup: function() {
        $(this).prev('label').fadeOut('fast');
      },
      blur: function() {
        if($(this).val() !== "") {
          $(this).prev('label').hide('fast');
        } else {
          $(this).prev('label').fadeIn('fast');
        }
      }
    });
/*------ Hide label if has default value on page load --------*/
    $(document).ready(function(){
      if($('.form-item input').val() !== "") {
          $(this).prev('label').hide();
      }
    });
  }
};
})(jQuery, Drupal, this, this.document);

<div class="form-item form-type-textfield form-item-field-email-address-und-0-email">
  <label for="edit-field-email-address-und-0-email--2">Email Address <span class="form-required" title="This field is required.">*</span></label>
 <input type="text" id="edit-field-email-address-und-0-email--2" name="field_email_address[und][0][email]" value="foo@foofighter.foo" size="60" maxlength="128" class="form-text required">
</div>

if ($(value).val() != ""){
  var fieldId = $(value).attr("id");
  $("label[for='"+fieldId+"']").hide();
}