The Ultimate Employee Guide to Non-solicitation Agreements
New York non-solicitation agreements are designed to prevent employees from taking customers and/or employees with them after they change jobs. Non-solicitation disputes almost always arise after an employee leaves and attempts to woo his former employer’s customers or employees. After all, customers and employees are the lifeblood of businesses. Ottinger Employment Lawyers has handled hundreds of these cases and we created this guide to help people understand the basics of a non-solicitation dispute.
General Principles of New York Non-Solicitation Law
New York non-solicitation law closely follows New York non-competition law because both agreements are restraints on trade and therefore disfavored by the courts. Courts generally take a dim view of New York non-solicitation agreements and will enforce them only in very specific circumstances.
New York non-solicitation agreements are enforceable only if the restriction imposed is (1) no greater than necessary to protect the legitimate business interests of the employer, (2) does not impose an undue hardship on the employee, and (3) does not harm the public. BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-389 (1999).
With New York non solicitation agreements, courts tend to focus on customer relationships that were developed and nurtured during the course of employment. Courts are willing to enforce these agreements “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. Most non-solicitation cases focus on identifying customer relationships that were created solely during the employee’s term of employment.
Soliciting Customers: Who is Off-Limits?
If an executive leaves a company, who can she solicit? Is she barred from soliciting all customers of her former employer or all potential customers of her former employer? Or only those customers that she met and serviced while employed by her former employer? What about customers that she knew before joining her former employer? Or customers that she met after leaving her former employer?
General rule: An employer can only protect the “goodwill” and relationships that an employee develops with an employer’s client during his employment. BDO Seidman 93 N.Y.2d 391.
An employer cannot legally stop you from soliciting customers that you developed outside of your employment. This means that you are free to contact customers that you met before or after your employment with the company at issue. In other words, the only clients you cannot solicit, are clients of your former employer who you met during your time of employment.
Companies generally want to prevent employees from taking other employees with them when they leave. The primary tool used to achieve this purpose is the non-solicitation agreement. Most New York non-solicitation agreements include a clause that prohibits the solicitation of employees for a period of time. Most companies and their employees believe that these provisions are valid and enforceable, but often they are not.
You can solicit employees from your former employer as long as it does not result in the disclosure of trade secrets or other confidential information of the company.
But employees must realize that courts are more inclined to enforce these agreements than agreements regarding the non-solicitation of customers. This is because restrictions on the solicitation of employees are less burdensome as they don’t prevent employees from practicing their trade or specialty.
There are a few cases on this topic in New York, but not many. These cases focus on the interests of the employer. A non-solicitation provision may be enforced if the solicitation of employees will result in the disclosure of trade secrets or confidential customer lists and the like. A non-solicitation provision can also be enforced if the employees being solicited possess truly unique or extraordinary skill that was developed while employed by the company.
In general, courts are reluctant to enforce no-hire and employee non-solicitation agreements. They will only do so to prevent the disclosure of genuine trade secrets or in the rare case of an irreplaceable employee with skills learned under the stewardship of the employer. Courts reject pretty much all other arguments. For instance, courts have rejected claims that the solicitation of employees will (1) destabilize the company’s workforce, (2) cause the company to lose significant costs incurred in recruiting, hiring, training and educating employees or (3) cause mass resignations. As such, companies generally have a difficult time preventing the solicitation of employees and that is not a bad thing. Some believe that non-solicitation agreements are harmful and should not be used. They feel that the freedom to move from company to company encourages competition and sparks innovation.
Get a Review & Consultation Regarding Your New York Non-Solicitation Agreement Matter
If you have a question about a nonsolicitation agreement, consider a Review & Consultation. We will review your nonsolicitation agreement and then meet with you in person, or on the phone, to review your situation and come up with a plan of action. We charge a flat fee of $500 for the Review & Consultation. We are often hired to do additional work after the Review & Consultation. We can negotiate a solution on your behalf or represent you in legal proceedings. We have been handling these cases since 1999.