cases, commentary and news related to restrictive covenants
Tuesday, January 5, 2010
The Meaning of "Solicitation"
Most well-drafted non-compete agreements now contain more limited activity restrictions, such as client non-solicitation covenants. These commitments are designed to limit an ex-employee's contact with customers on behalf of a competitor, but they don't purport to limit employment altogether. For obvious reasons, they are most often directed at employees in sales or client-facing positions.
But what does the term "solicit" really mean? This is a question I often have to answer when advising clients what is permissible and what is not. As with any contract, the terminology selected will carry significant weight, and so the analysis begins there. Solicit does not mean "accept business from", but if the agreement says that an employee cannot "solicit, take away, contract with, or accept business from" a protected account then so-called passive solicitation will be prohibited as well.
Generally speaking, solicitation is all about intent. A court will examine the method an employee uses to contact and reach out to former customers and discern his or her intent that way. Judge Kocoras once remarked that solicitation does not require "an express request for business." Contact that is more benign and oblique can rise to the level of "solicitation." Courts also have held that an employee cannot make contact and advise a client that after a certain period of time, he or she will be able to work with that client again. The solicitation of future business is not exempt.
We frequently see a gray area in regards to announcement e-mails and postcards, where an ex-employee simply informs the former contact of a departure and new affiliation. Generally speaking, employees ought to assume that this rises to the level of solicitation - particularly if there is any customization to it.
General rule for announcements: the shorter the better! With each additional word, the chances that a court will find a solicitation rise significantly. Any time there is personal contact, an employee is at risk for violating a non-solicitation clause. A court will be able to infer intent, and it will step into the shoes of a reasonable person and assess how a particular communication was received. Put differently, a court will look to whether a person would have interpreted a communication as a request for business, even if those exact words were not used.
Then again, not every communication with a protected account will constitute solicitation. Certainly, a general advertisement or press release will not suffice. Nor would an employee's act in changing an online profile (which may result in an e-mail notification to friends or contacts) or sending a Christmas card (as long as the card is confined simply to holiday greetings). If the employee has a long personal relationship with a protected account, he or she probably will be afforded some latitude in continuing that relationship without the court inferring that some contact only could be understood as a business solicitation.
Subscribe to: Post Comments (Atom)
Post a Comment