DRAFTING EFFECTIVE NON-SOLICITATION PROVISIONS
For many businesses, relationships with clients are a primary asset. Protecting that asset is crucial to long term success.
Employers often ask employees to sign non-solicitation agreements which prohibit the employee from going after the employer’s clients for some period of time after the relationship with the employee ends.
It is important for employers to realize that if they are going to take the time to get the employee to sign such an agreement, they should make sure that the agreement is drafted properly.
A man we will call Brian was a computer specialist. He was hired by a company that had been contracted by a government department to provide computer services. Although Brian’s employer was the computer services company, he spent all his days working in the government department helping them with their computer needs.
This computer company had many such contracts with many different customers.
As part of taking this job, Brian signed an agreement with the computer service company that said that during his employment and for a year after it ended, he would “not attempt to solicit from any of the employer’s clients or prospects without the written consent of the employer.”
The computer service company’s contract with the government department was coming to an end and had to be renegotiated. Other companies could bid on the contract. Brian allowed a competitor of his employer to attach his resume to their bid to take over the contract. That competitor got the job. Brian kept going to work every day in the same government department but now got his cheques from somebody else.
Brian’s old employer sued him for breach of the non-solicitation clause.
Courts are very hesitant to interfere with anyone’s right to make a living. Given that the employers are thought to be the ones with the money and the lawyers, any agreement they draft will be scrutinized very closely by the courts to make sure it is fair and reasonable.
The courts refused to enforce the agreement Brian had signed because it was ambiguous and written too broadly.
Remember, the clause said Brian could not solicit business from “any” clients. Brian only worked with one of the computer service company’s clients. They had, potentially, hundreds. How was Brian supposed to know who all those companies were? How would he know if he was soliciting somebody who was his old employer’s client or not?
The contract Brian signed also said that he could not solicit prospects of his old employer. Does that mean if the company had solicited a potential customer five years previously they were still a prospect? How would Brian know if someone had been solicited?
Does the word “clients” mean all clients in the history of the company or just those who were clients during Brian’s employment?
By not writing this clause clearly, which could have easily been done, the company lost a client and spent a lot of money on litigation. It also ended up paying Brian’s legal costs. For example: “ For one year after the cessation of your employment for any reason you will not solicit any business you serviced or solicited on our behalf during the last 12 months of your active employment for the purpose of selling them competitive services or products.”
It really could have been that easy.
The good news for employees that have signed vague non-solicitation clauses like Brian’s, and there are a lot out there, is that they are likely not enforceable.
Occasionally I have advised employees who have received a letter from a former employer cautioning them not to breach a non-solicitation clause like Brian’s. I usually respond by indicating that my client does not know who all the employer’s clients and prospects are the he should avoid soliciting. I then invite the employer to send a list of all their clients and prospects so that my client can be sure not to solicit them. I ask this, of course, tongue in cheek.
I have not run into an employer yet who is willing to send that information to anyone. Their silence always puts an end to the issue.