New York Non-Solicitation Agreements
Non-solicitation agreements are contracts between a company and an employee that limits the employee’s ability to solicit clients for one’s benefit or the benefit of a competitor after leaving a company. The agreement may also include a provision that prevents the employee from soliciting other employees to move with them or make use of any confidential information. To be enforceable:
- The employer must have a legitimate business reason for imposing the non-solicitation agreement, such as protecting a customer list, trade secret or other valuable information.
- The material must be worth protecting (e.g., something that is not readily available to the general public). For example, a competitor who can determine a company’s customers by referring to a phone book or reviewing online listings would not hold up in court.
- Employees and customers must be able to leave a company voluntarily and work for a competitor as long as they do not improperly solicit.
Why Companies Use Non-Solicitation Agreements
Companies use non-solicitation agreements to prevent departing employees from taking their customers and employees. Some companies are more concerned than others. For example, companies that invest heavily in employee training or in developing customers often use non-solicitation agreements to protect their investments. Companies in sales and service industries tend to use non-solicitation agreements more than others.
A Non-Solicitation Agreement Buried in Your Employment Agreement
Non-solicitation agreements are almost always part of an employment agreement that contains other terms and conditions of your employment. Non-solicitation clauses are typically inserted along with non-compete agreements. Non-solicitation and non-compete agreements are often referred to as “restrictive covenants.” This is because these two agreements attempt to restrict or limit a person’s behavior after their employment ends.
It used to be that only high-level executives were asked to sign restrictive covenants. However, many companies today abuse these agreements and require all employees, even low-level employees like janitors or sandwich makers, to sign them. See, These Days, even Janitors are being Required to Sign Non-Compete Clauses. As a result of this abuse, courts, and even the New York Attorney General, are voiding these agreements.
Non-Solicitation Agreements in New York
In New York, non-solicitation agreements are reviewed under the same standard as non-compete agreements because they are both restrictions on trade. As a general rule, an employer only has legal standing to restrict you from soliciting clients that you developed a relationship with during the course of your employment. An employer has no legal right to stop you from soliciting customers that you acquired outside the workplace (either before or after your employment). As a result, New York courts only enforce non-solicitation agreements in particular circumstances “to prevent competitive use, for a time, of information or relationships which pertain peculiarly to the employer and which the employee acquired in the course of the employment.” Blake, Employee Agreements Not To Compete, 73 Harv. L. Rev. 625, 629.
In practice, what most companies and employees don’t realize is that you can solicit employees from a former employer provided that the solicitation does not result in the disclosure of trade secrets or confidential information (e.g., confidential customer lists and the like). Any release of this information would trigger the enforcement of a non-solicitation agreement if the employee signed one. A non-solicitation provision could also be enforced if the employee being solicited possesses a unique skill set that was undoubtedly cultivated while employed by the company. Of course, the burden of proof would be on the employer to prove that the agreement was valid and that the employee violated the terms of the contract. Nevertheless, these are two scenarios that a court would likely enforce a non-solicitation provision to protect the interests of a company. New York courts tend to reject almost all other non-solicitation agreement claims.
Courts are even more reluctant to enforce agreements regarding the non-solicitation of customers because it places a burden on an employee’s ability to practice their trade or specialty. For example, a salesperson who met all ten buyers of her industry’s product while employed, wouldn’t be able to work once she left the company if she signed a non-solicitation agreement. Since everyone has the right to work in a profession of his or her choosing, courts are unlikely to side with an employer who unfairly attempts to restrict this right.
Review & Consultation
Disputes about non-solicitation agreements almost always arise after an employee has left one employer and moved on to another job. These disputes often start with a cease and desist letter sent to the employee and the employee’s new employer. These letters often sound threatening, but they are often empty threats. Most non-solicitation agreements are unenforceable. They are disfavored in New York and enforced only in exceptional circumstances. If you are concerned about one of these agreements, contact us to set up a Review and Consultation.