Hidden Non-solicitation Clause

I was recently terminated from a sales management position and have since accepted a similar position with another company in the same industry. Upon leaving, my former employer brought to my attention a clause in an employment agreement I had signed (about a year into the job) that prohibits me from soliciting or accepting business from accounts of my former company for a six month period.

One of my best clients at the former company has since phoned me, upset at my termination and inquiring when I may again be able to work with him. I was clear with him that I would be unable to do so for six months. After he pressed, I reluctantly revealed to the customer the name of my new company, as the agreement did not expressly prohibit that. Prior to hiring on with the new company, I informed them of the agreement. I have not (and will not) disclose the name of the customer to them after the six months has elapsed.

My questions are: Am I at any risk for even talking with this customer? If I decide to aggressively pursue his business after six months, will that pose me a problem?

1 answer  |  asked Oct 17, 2007 3:03 PM [EST]  |  applies to Ohio

Answers (1)

Christina Royer
Fair competition after non-solicitation agreement expires

As a preliminary matter, any attorney would have to read the actual agreement you signed to be able to give you specific advice about your rights and obligations relating to it.

Nonetheless, your question raises valid concerns about what is acceptable competition in the marketplace, whether there is a non-compete or non-solicitation agreement in place.

There are laws that prevent businesses and individuals from stealing and improperly using another business's trade secrets. This is so regardless of whether the company has its employees sign non-compete/non-solicitation agreements.

There are also laws that prohibit businesses and individuals from engaging in behavior that wrongfully interferes with another businesses relationships with its own employees and customers. Likewise, these laws are in place regardless of a non-compete/non-solicitation agreement.

In your case, even when your non-solicitation agreement expires, these laws will continue to protect your former employer.

This means that anything you do to pursue this particular customer (or any other of your former customers) must fall into the category of normal business activities that are designed to promote reasonable competition.

For example, you may not use confidential information or trade secrets (such as pricing structures, sales data, etc.) from your former employer to try to procure this customer's business.

Also, you should not disclose confidential information or trade secrets to your new employer in order to procure a competitive advantage that the new company wouldn't already have in the marketplace.

You should also refrain from "bad-mouthing" your former employer, or saying false and defamatory things about the company, in order to induce its clients or employees to sever their relationships with your former employer.

All of that said, if this customer likes you and wants to continue doing business with you, and is comfortable with your new employer, then it is not unreasonable to try to foster a business relationship after the six-month period expires.

This does not mean that your former employer could not try to enforce rights it believes it has under the non-solicitation agreement or under the legal priniciples discussed above. There is always this risk. But, if you conduct yourself in a manner that is consistent with good business ethics, and make sure that you are engaging only in fair competition, it would be more difficult for the former employer to prevail.

posted by Christina Royer  |  Oct 18, 2007 2:19 PM [EST]

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