“Non-Solicitation Agreements – Ten Practical Questions”

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:

Q: What, exactly, does “solicit” mean?
A: Think of it this way: “Intentionally reach out and seek someone’s business.”

“Solicit” is an “action verb,” meaning it is something you do, intentionally. It would include sending a letter, making a phone call, transmitting an email, each for the purpose of seeking business. Sending a holiday card would probably not be considered soliciting, but putting on that holiday card the name of your business, and your business contact information, would probably be considered “soliciting.”

If you met a former client at a baseball game, surely you could give him or her a warm hello and a hug. That would not be a violation of a non-solicitation agreement.

But if, at the ball game, if you then said, “By the way, I have opened up my own business, and I know you do business with my former employer. Would you mind sending me some of your business, instead to them,” you would probably be considered to be “soliciting” their business, and in violation of a non-solicitation obligation.

Q: What does “indirectly” mean?
A: This is probably the most commonly asked question about non-solicitation provisions.

Generally, “indirectly” means “through other people or through other means.” So, you cannot have your assistant in your new business call clients from your last job and seek business from them for your new company. Nor can you send to the clients of your former employer a letter announcing to them that you are now in business for yourself, and providing them your new contact information.

Been asked to sign a non-solicitation agreement? Consider our “Model Letter: Response to Request You Sign a Non-Solicitation Agreement” shows you “What to Say, and How to Say It.™ Contains the 16 most common reasons to limit a non-solicit. To obtain your copy, just [click here.] Delivered by Email to Your Printer.

Q: Can I open up a website?
A: You sure can, as it is not “active” solicitation. However, while you can open up a website, you cannot send letters to the clients of your former employer stating, “Hey, look at my new website.” That would be prohibited by a non-solicitation agreement.

Q: Must I avoid having any “contact” whatsoever with my former employer’s clients?
A: No, “contact” and “having contact with” are two different concepts. “Contact” is an “action verb,” just as “solicit” is. Both mean “reach out” to someone, and intentionally seek them out.

On the other hand, “have contact with” is more passive in nature, and includes such things as “bump into them at the supermarket” or “answer their telephone calls that come in to you.” The difference is that “contact” implies an intentional act, while “have contact with” suggests a passive interaction, not necessarily intended.

Q: Can I do any advertising in local newspapers?
A: Generally, speaking I would say “Yes.”

That said, you would probably be far better off if your newspaper ad said something like “Martin Jones – Marketing Consultant – 10 Smith Street, Cheyenne, Wyoming (888) 555-1335,” rather than “Customers of Advance Marketing: Your former Marketing Pro at Advance Marketing, Martin Jones, is now in business for himself. Come meet with him at his new office at 10 Smith Street.”

If you are a former employee, and not sure if you signed a non-solicitation agreement? Consider our Model Letter entitled “Model Letter Asking – Carefully – Have I Signed Any Post-Employment Restrictive Agreements?” It shows you “What to Say, and How to Say It.™ To obtain your copy, just [click here.] Delivered by Email to Your Printer.

Q: What is a “prospective client?” Isn’t everyone a “prospective client?”
A: This is perhaps the second most commonly asked question about non-solicitation agreements. The best definition might be “a person or company with whom your employer has recently communicated about doing business, or has plans to communicate with them to do business.”

Q: Can I do business with my former employer’s clients if they contact me?
A: Yes, you can. Don’t forget: “solicit” is an “action verb,” and requires you “go out there” to get their business. If a customer or client of your former employer contacts you, and expresses a desire to do business with you, your non-solicitation obligations are not violated.

Watch out, though, for any language that says “solicit or serve,” or “solicit or do business with,” or the like. Non-solicitation wording like that would make your “non-solicitation” agreement more like a “non-competition” agreement and, as a result, doing business with that person – no matter who came to who – would put you in violation of your non-solicitation obligations.

Q: What happens if I accidentally solicit someone I didn’t know was a client (or a prospective client) of my former employer?
A: First, if you did not know that a person or a company was a customer or client of your former employer, that would make your accidental solicitation a “technical violation” of your non-solicitation obligations, which is not usually a very serious matter to resolve. “Technical violation” is what we lawyers call something that is not as substantial or meaningful as a “substantive” or “material” breach of a legal obligation.

If, as a result, you receive a “Cease and Desist” letter from your former employer, or its legal counsel, you should just explain in a responsive letter that your solicitation was unknowing. If they demand you stop doing business with that customer or client, then you should stop doing so. It is possible, although unlikely, that your former employer might demand that you pay to them any monies that you earned from that customer or client. If that takes place, I would suggest that, if it is a small sum, pay it; if it is a meaningful sum, you should then consider having an attorney take over the conversation, and seek a reasonable solution.

Q: Can I take with me a copy of my former employer’s client list to help me avoid problems with non-solicitation?
A: No, no, no and no. While that may seem like a good idea, and a good-faith measure, it would surely constitute what is called “theft of trade secrets,” which is an egregious act of misconduct. In many states, it even qualifies as a rather serious crime. Client lists are “near sacred” business secrets, and their being “taken” a serious theft of those valuable secrets.

Q: Is there anything I can do to make sure I don’t violate the non-solicitation provision?
A: No, there is nothing you can do to make sure that, accidentally, unintentionally, or in the eyes of another person you do not appear to have done so. There are different “shades” of violation, some meaningless and some meaningful.

Here’s an offbeat example: If you walk through a college campus, is it likely that you might be bitten by a lion? No, not likely at all, but it’s not impossible, either. If, however, you walk through a lion-infested plain in Africa, you may not be bitten by a lion, but your chances are surely higher that you might. So it is with non-solicitation agreements: nothing is impossible, but being careful makes it less likely you will have a problem.

One thing you might do during the period of time you cannot solicit clients and customers, is to keep a written log of each client interaction you have, and write on that log how the client and you came together. By a referral from a fellow congregant at church? Through an advertisement you placed in a newspaper, or perhaps your website? This can both keep you alert for possible problems, and serve as a possible defense to any allegations made that you violated a non-solicitation obligation.

Erica, your questions are good ones. I hope my answers provide you with the guidance you seek. Best of luck in your new business!

My Best,
Al Sklover 

P.S.: To learn the basics (and then some) about non-solicitation agreements, you might want to review one of my blogposts that is considered by many to be the “classic” on the subject. It is entitled “Non-Solicitation Agreements – from A to Z.” You can do so by simply [ clicking here. ]

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