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On Friday, July 20, 2012 by Monica Velazquez posted in Noncompete Blog
Solicitation. The mere word evokes a sense of seediness and underhandedness. When an employee leaves your company, particularly if he is disgruntled, thoughts of payback abound. How can he get even with your company? At times, it is a cathartic posting on Facebook, a ranting voicemail, filing for unemployment benefits, or initiating a claim or lawsuit. However, to inflict real damage, your employee may solicit and take your company’s customers or other employees to work for a competitor. To prevent this, employers arm themselves with confidentiality, non-solicitation, and non-competition agreements that are aimed at restricting the conduct of employees after separation. While we extensively examine issues involving non-competition and confidentiality provisions for you in our weekly blog, two issues with non-solicitation agreements are often overlooked.

First, how precise is the term “solicitation” defined in your agreement? Generally, agreements only contain a broad prohibition against “soliciting or attempting to solicit” your customers, prospective customers, vendors, referral sources, or employees. Since solicitation is defined, in part, as “to appeal, to apply for, to ask for the purpose of receiving, to try to obtain,” many courts – like Justice Potter Stewart writing about pornography 48 years ago– will know it when they see it. In one case, a Texas court used the definition of “solicit” found in Black’s Law Dictionary to determine that an employee’s disclosure of his customers’ names violated the non-solicitation clause of his agreement, although the customers names themselves were not confidential information protected by the confidentiality / non-disclosure clause in the agreement. [1]

Further, employees frequently claim that they did not initiate the contact, and, instead, it was the customers or employees who solicited or called on the employee. Will your non-solicitation agreement protect you in that situation? Generally, no, unless the non-solicitation clause covers additional conduct such as direct or indirect, “contact, aid, acceptance of work, consultation, placement with, providing services for, hiring of, inducing or causing the termination of the relationships with” the customers with whom the employee worked or your other employees. For example, such broad non-solicitation clause was upheld in a Texas case where the court held that a non-solicitation clause not only prohibited an insurance broker from soliciting clients, but also from actually working with them for two years after her termination, regardless of where the clients were located.[2] Thus, regardless whether the clients initiated the contact with the insurance broker, she could not perform any of her job functions for them. Essentially, the non-solicitation clause was a non-compete prohibiting that employee from working with former clients.

Second, does your non-solicitation agreement meet all of the requirements of the Texas Covenants Not to Compete Act? [3] For several years now, Texas courts have treated customer non-solicitation agreements as restraints on trade governed by the Act. However, last year, the Texas Supreme Court conclusively indicated that non-solicitation agreements must meet all of the requirements of the Act [4], including that they must be ancillary to an otherwise enforceable agreement and, importantly, contain reasonable limitations concerning time, geography, and scope of activity to be restrained. [5] You should no longer rely on a standard non-solicitation clause that does not tell your former employee exactly what he is prohibited from doing. As a result, it is worth examining your non-solicitation clauses to ensure that they contain reasonable limitations concerning time (i.e. 2, 5, 10 years), scope of activity (i.e. solicit, provide services for, or work for former customers), and geography (i.e. particular location or those specific customers with whom the employee worked for 18-24 months prior to termination). Most of these limitations are already contained in your non-competition clauses, but if they are missing from your non-solicitation clauses, you could be vulnerable to an attack by that disgruntled employee plotting to get even with your company.

[1] York v. Hair Club For Men, L.L.C., 2009 Tex. App. Lexis 4866 (Tex. App. – Houston [1st Dist.] June 25, 2009).
[2] Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654 (Tex. App.—Houston [1st Dist.] 2009, pet. denied)
[3] Tex. Bus. & Com. Code §15.50.
[4] DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 681-82 (Tex. 1990); Guy Carpenter & Co. v. Provenzale, 334 F.3d 459, 464-65 (5th Cir. 2003) (applying Texas law and stating that non-solicitation covenants restrain trade and competition and are governed by the Act).
[5] Marsh USA, Inc. v. Cook, 354 S.W.3d 764, 777 (Tex. 2011).
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