An Effective Way to Analyze Your Restrictions

“Limits, like fear, are often an illusion.”

– Michael Jordan

ACTUAL CASE HISTORY: For two weeks we were in a pitched battle in Federal court, trying to convince a Federal Judge to negate a non-competition agreement. Both sides had submitted legal briefs, and the Federal Judge ordered “oral argument,” which is each side giving its position, and the Judge hammering away at each side’s arguments with his questions.

Our client was a salesman in the field of medical devices, specializing in the sale of manufactured, artificial heart valves to hospitals for surgical replacement of damaged valves. After leaving his prior employer, he took a new job, and was doing quite well – until he was sued, and his new employer placed him on “Suspension – Leave of Absence” until the case was over.

In preparation for the upcoming “oral arguments” in perhaps my tenth reading of the non-competition agreement, I discovered something that no one else had discovered before, not even the Judge: the non-competition agreement was not, in fact, a non-competition agreement.

My careful reading revealed that working for a competitor was not, in fact, prohibited. What the supposed non-compete agreement prohibited was “working for a competing medical device manufacturer, anywhere in the eastern half of the United States, that sells to hospitals replacement heart valves based on the same technology.”

That last phrase, those final five words, and their importance, had somehow escaped notice by several people. There was no prohibition against working for a competitor, but only on working for a competitor while selling heart valves based on the same technology. The restriction was on using a certain technology more than it was on working for a competitor.

In fact, the new employer did not sell manufactured, artificial heart valves, but instead heart valves derived from the hearts of pigs. Neither the lawyers nor the Judge were familiar with the technology, and just assumed the same technology was used. Fortunately, I recalled hearing of the distinction during my initial, in-depth consultation with my client.

We asked permission to submit a supplemental brief to the Court on this very point, and the Judge permitted it. After conferring with their client, the former employer’s attorneys withdrew the case. Noticing just five words – based on the same technology – that’s all it took.

LESSON TO LEARN: When it comes to non-competition and non-solicitation agreements, “The answer to your question is almost always right there, in the words.” Reading dense legal agreements can sure put a lot of people to sleep – including lawyers. That’s always the case in law, but there is no substitute for careful reading and analysis, especially when it comes to non-competition agreements and non-solicitation agreements.

I have seen it time and time again: the applicability, effect, validity, and duration of non-competition and non-solicitation agreements being misread and misunderstood, and for this reason unnecessarily limiting the client’s career by false fears. I’ve seen it time and again: highly qualified and experienced lawyers telling their clients “Sorry, there is nothing we can do” when, in fact, all that is necessary to win a person’s employment freedom is to read and analyze carefully.

To assist you in doing that for yourself, in my 30+ years of handling non-competition and non-solicitation disputes, I’ve devised a rather simple way to analyze non-competition and non-solicitation agreements. It’s what I have come to call “C.A.T.C.H.,” which stands for (1) Competition, (2) Activity, (3) Time, (4) Conditions, and (5) Horizon.

This is not the usual, hackneyed “Geography, Duration, Scope” legal analysis that so many lawyers will refer to when discussing non-competition agreements. What they would be talking about is that a Judge will often look at the reasonableness of the restrictions’ “Geography, Duration, Scope” and cut one or more of them down if the Judge thinks they are unreasonable.

Our “C.A.T.C.H.” analysis is more immediate, more valuable and more important: “Does this non-competition or non-solicitation agreement even apply to you?” Might careful reading and analysis reveal you have no reason to hire an attorney, due to potentially unfounded fear based on an incorrect analysis? Why hire an attorney, and consider going to Court, if you really don’t need to? More importantly, why turn down a job offer, or not seek one, if you are not really restricted?

This endeavor is not “legal nit-picking.” Instead, it is the essential task of every employed person: to protect your employment freedom, and to utilize your business skills, experience and relations to your very best advantage.

I hope you find my “C.A.T.C.H.” analysis helpful, and its title a little “catchy.”

WHAT YOU CAN DO: Here’s eight steps you can use to help yourself understand whether or not, how badly or not, you may be restricted by a non-competition agreement or non-solicitation clause you have signed, or you may be asked to sign. And, too, they may help you understand how to get around any such restrictions. As Michael Jordan says, “Limits, like fear, are often an illusion.”
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Keep in Touch with Clients During Non-Solicit Periods

“ Make new friends but keep the old.
One is silver and the other gold.”

– Traditional Girl Scout Song

ACTUAL CASE HISTORIES: In recent years, there has been an undeniable increase in the number of employees, worldwide, who are required to sign “non-competition” agreements by their employers. Recently, though, “non-compete’s” are facing greater scrutiny and skepticism than ever before among many Judges, as non-compete agreements frequently entail keeping a working person – and probably a person supporting a family – out of work without a really good reason. Thus, employers and their lawyers are finding the enforceability of non-compete agreements less and less certain as time goes on.

As a result, with the same goal in mind – not losing clients and customers when an employee leaves – many employers are changing tactics. The increasingly popular tactic is to use “non-solicitation” agreements, instead, which permit employees to work for any employer of their choice, but requires them to refrain from “soliciting” business from the former employer’s customers and clients for a period of time, commonly from three months to 24 months. These are finding a more hospitable response from Judges when they are asked to rule on their enforceability.

Judges are far more likely to enforce non-solicitation agreements because they do not mandate the employee’s inability to work in their field of endeavor, but merely avoiding going after the business of the employer’s clients.

Like any other restrictive agreement, employees must abide by the terms of their non-solicitation agreements. That said, we have found, that many of our clients have not only avoided “soliciting” business from their former employers’ clients, but have also avoided any contact or communications with them whatsoever, which is entirely unnecessary and often quite self-defeating.

Out of a gut-level – and irrational – fear, many employees completely shut down their communications with their former customers and clients, without good reason, and by doing so decrease the chances that, after the non-solicitation period has expired, they can promptly resume the business relation previously enjoyed, as well as the fruits of it.

Don’t unnecessarily limit yourself. Maintain your valuable and hard-won client relations while under the restrictions of a non-solicitation; just don’t solicit. It’s that simple.

LESSON TO LEARN: Here is the text of a commonly worded non-solicitation agreement:

“Employee agrees that during his or her employment by the Company and for a period of one (1) year after Employee has ceased to be employed by the Company for any reason, Employee shall not, without the prior written consent of the Company, directly or directly solicit, divert or take away, or attempt to divert or take away, the business or patronage of, the Company’s clients, customers, or accounts, or active or prospective clients, customers, or accounts.”

While it may sound confusing, it is easier analyzed if you simply “parse” it – which means cut it up into “bite-sized pieces.” As an experienced employment lawyer, all I see is (1) one year, (2) will not in any way, (3) try to solicit or take away, (4) business, from (5) the company’s clients and prospective clients. Does it say “Stop all communications with customers and prospective customers? No, nothing like that . . . so long as the communications do not “seek to solicit or divert business.”

That distinction is an important one, because the business and personal relations you may have established in dealing with customers and clients are a good part of your value in your field. Those relations do not have to be “ended cold,” but can be “kept warm” until the non-solicitation period of time is over.

Having signed a non-solicitation agreement does NOT mean that you cannot communicate with your employer’s clients. Nor does it mean cannot maintain your personal relations with your former employer’s clients. And, too, it does not mean you cannot plan to solicit their business. It just means that you cannot directly or indirectly “solicit” them or their business.

Far too many people who are under non-solicitation restrictions unnecessarily limit their activities and communications, and in doing so unnecessarily limit their career success, after signing a non-solicitation agreement

If the non-solicitation agreement you signed is worded like the one above, written only with “solicitation” in mind, then you are free to do everything else. So long as you do it very carefully, it may be very much in your interests when later – after the non-solicitation period has expired –
soliciting their business.

Life is hard enough. Don’t defeat yourself. Do keep in touch with the clients of your former employer. By continually keeping in touch you only increase your chances of them becoming your clients when “the coast is clear.”

WHAT YOU CAN DO: If you have signed a non-solicitation agreement, bear these thoughts in mind, and don’t shortchange yourself:
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Question: Dear Alan: I was laid off two weeks ago from my position at a marketing firm. In my severance agreement, there is a “Non-Solicitation” clause that says this:

“I agree that, for six months, I will not, directly or indirectly, solicit, contact, or identify any of the Firm’s clients or prospective clients on behalf of any person or company.”

I have decided to open up my own marketing firm and have several questions for you. Can you please answer them. Thank you

Erica
Cheyenne, Wyoming

Answer: Dear Erica: Here are my answers to your questions:
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Question: Three months ago I took a new position in my industry. I have now been given the formal approval to assemble a team of my own. I know of a colleague who works for my former employer, who would be a most favourable addition to my team.

Might I be sued for poaching an employee from my former employer?

Brijesh
Stanmore,
Greater London, UK

Answer: Dear Brijesh: I am not entirely familiar with English law on this subject, but arranged to have a colleague in London review my thoughts, which I am told are applicable in the UK, just as they are in the U.S. Here they are:
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Question: I am a Business Development Specialist for a large Wealth Management firm. When I started my job four years ago, I was required to sign a non-compete agreement.

The non-compete agreement says that, if I ever leave my job with the firm, for any reason, for 12 months I can’t solicit or transact any business with “customers or prospective customers” of the firm. Isn’t everyone a “prospective customer?” If not, then who is and who is not?

Leon
Louisville, Kentucky

Answer: Dear Leon: I’m glad you submitted your question, because it’s a very commonly one. It comes up nearly every time I counsel a client regarding a non-compete agreement or a non-solicitation agreement. This is what I counsel my clients:
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