Dealing With a Nonsolicitation Agreement

By Cliff Ennico

November 20, 2018 6 min read

"I was laid off from a corporate job after 10 years as a sales and marketing executive, and am thinking of striking out on my own as a marketing consultant for large corporations. There's just one problem (well, maybe two).

"The good news is that my employment agreement with my former employer does not contain any sort of 'noncompete' clause that would prevent me from working in the same industry. The bad news is that there are two clauses in the agreement that would:

"—prevent me from soliciting or doing business from any of the employer's customers for two years; and

"—prevent me from employing any of the employer's current or former employees for two years.

"Now, I realize that my former employer doesn't want me to steal business from them, but I do want to speak to some of the customers I dealt with at my former employer — I will be trying to help them generate business from a type of customer my former employer wasn't all that familiar with, so I don't think my former employer should view anything I do as a threat.

"The agreement not to hire away their employees is not a problem (I plan to work solo) except that my current girlfriend (soon to become my fiancee but she doesn't know it yet) still works at the company. If she leaves the company after we become engaged — we are planning to move to another city so it will be difficult for her to stay at the company — have I violated that agreement?"

As large companies move farther and farther away from traditional noncompete agreements, they are focusing their attention more and more on detailed nonsolicitation agreements like the ones described in this reader's email. While courts in general do not like noncompete agreements, they are somewhat more likely to enforce a carefully drafted nonsolicitation agreement, especially if there's a significant risk of the ex-employee stealing the employer's trade secrets or convincing customers to move their business to a competitor.

Marketing and sales executives, unlike engineers and information technology types, normally do not have access to trade secrets regarding the company products. But they do have close — often very close — relationships with the customers, and there's a real risk that a key customer may follow their rep to a competing business.

Your nonsolicitation agreement has two parts to it: You cannot solicit business from your former customers, and you cannot do business with them. You clearly plan to solicit business from your former customers, but what's not as clear is whether or not your activities will harm your former employer in any way. For example, if you were working for a charity and soliciting contributions from your former customers, your former employer probably wouldn't complain. Sending your customers a letter or email (or better yet, speaking to them personally) announcing the formation of your new business without actually asking for business may not technically violate your agreement — ask your attorney about that. If the customers are reaching out to you rather than the other way around, that's not a solicitation.

The problematic part of your agreement is the prohibition from doing business with any of your former customers — that is not limited to business you have solicited from them and might well hurt your ability to earn a living during the two-year period. A court would likely view that language as an implied noncompete agreement and would apply a rigorous analysis to determine whether or not it is reasonable under the circumstances. Your goal, however, is to stay out of court altogether.

In my experience, there is no such thing as a boilerplate or standard nonsolicitation agreement — every one is slightly different, and you will need to have a good labor or employment attorney in your area look closely at the language in the agreement to determine if there are any loopholes that will allow you to offer noncompeting services to your former customers. Your attorney should also offer some guidance as to whether it is better for you to ask your former employer for permission to solicit noncompeting services from its customers (with a detailed explanation of why it should be OK) or simply wait out the two-year period before communicating.

As for the agreement not to solicit the company's employees, proposing marriage to your girlfriend should not be a violation, as you are not doing that to hire her for a competing business. Just to be on the safe side, though, I might recommend she not do anything — I mean anything — for your business until your two-year nonsolicitation period expires. And keep in mind that when she does leave your former employer and join your firm, she may be bound by her own nonsolicitation-of-customers agreement, and that would effectively extend yours for another two years.

Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.

Photo credit: at Pixabay

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