“Who is a ‘prospective client’ in a non-solicitation agreement?”

Question: Dear Alan: I have a non-solicitation clause in my employment contract. It says that, if I ever leave the company, I cannot solicit “any actual or prospective client or client referral source who had a business relationship with the company” during my period of employment by the company.

Is the prohibition of a “prospective” client too broad to be enforced?

Mankato, Minnesota

Answer: Dear Jessey: The question you present is an issue that arises very often, and it causes an awful lot of people an awful lot of anxiety. Let me do my best to address it for you:

1. Being “broad” or imprecise does not render words or obligations unenforceable. Courts are faced with “imprecise” words every day of the week, and come to think of it, nearly every word in the dictionary is capable of somewhat varying interpretations. Language, by its very nature, is an imprecise thing. There’s hardly a word in the dictionary that cannot be interpreted differently by different people, especially when it could make a difference to them in a financial sense. And, unfortunately, at least in this sense, lawyers are an amazingly “creative” bunch of people. If I told you some of the “creative interpretations” I have heard in Court, I am certain you would either laugh or cry.

2. When faced with imprecise words and phrases, Courts will look for (a) first, what they believe the parties may have intended, and, (b) if they are unable to determine that, second, what is reasonable under the circumstances. It is extremely rare that a Court will “throw out” an agreement (or part of an agreement) because it is too broad or vague. Instead, they will do their best to figure out which of the two versions presented to them was the original version agreed upon. If that is not possible, they will give credence to what they believe is the most logical, reasonable, sensible version to enforce.

One “rule of legal interpretation” you should be aware of is this: If words or phrases are imprecise, Courts will tend to interpret against the interests of the “side” who drafted it, as a kind of punishment. The underlying rationale for this “rule of legal interpretation” is to encourage clear writing, discourage “wise guy” drafting, and thus keep people out of Court. There’s nothing like good, old-fashioned “accountability” to get people to do the right thing in the first instance.

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3. “Prospective” is not an exact word, but it is not too difficult to define – or to delineate – in most situations. I fully understand that “prospective client” could include every person and company on this planet. But (a) it is quite unlikely that employer and employee really meant that, (b) that would not be reasonable in any circumstance, and (c) would make the “non-solicit” into something quite different – a non-compete provision.

There surely is little clarity in the phrase, but surely “prospective” client is somewhere between one end of the spectrum starting with “Possible Client,” which is closer to everyone on planet Earth, and ending with “Actual Client,” which is a limited number of people and companies that could be placed on a written list.

4. As a guide, and to reduce your anxiety, here are Four Criteria to determine whether or not someone is a “prospective client.” Not one of these Four Criteria is by itself conclusive, but all are relevant to a determination of “Is this a prospective client?”

(i) Is a plan underway to seek these people or companies as clients? If a marketing or promotion campaign is planned, and the people or companies in question are identified “targets” of that campaign, that would suggest – but not be determinative – that he, she, or it is a “prospective client.” On the other hand, mere chatter like “Sure would be nice to have them as clients” would mean nothing of concern.

(ii) Have time, efforts and money been expended to acquire their business? Taking people out to lunch, inviting them to dinners or to play golf, meeting with them to show them what you sell or provide would transfer a person or company from the category “possible client” into “prospective client.” Then again, if they have said “No thank you,” or words to that effect, would convert them back from “prospective” to “possible” clients, and thus available for your solicitation should you choose to go to another firm.

(iii) Has any direct and substantive communication been initiated by either company or customer? One telltale sign that a company views a person or business to be a “prospective” client or customer is the degree and type, if any, of communication between the two about business matters.

Thus, if the company has sent out a million postcards, and one went to a person or company, that would not seem to me to qualify that person or company as a “prospective” client or customer. But, if that person or company then called to inquire as to the products or services advertised, then the “prospective” client or customer description would begin to be applicable.

(iv) Finally, has business begun, and not ended? Transacting business can make a client an “actual client,” but, just because the company has begun business relations or transactions with a customer does not make them a “prospective” client or customer. That is because many things could change that relation, including (a) dissatisfaction on the part of the client or customer with the goods or services, (b) a decision by the company that the amount of business transacted was not sufficient to continue the account; or even (c) the halting of sales of the goods or services formerly sold. Like the other factors noted above, this one is not determinative on the issue of “prospective client” or not.

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5. Oh, Yes . . . don’t forget good old “Common Sense.” Let’s not get too complicated. Though many believe that “Common sense is just not that common anymore,” you can usually trust that a common-sense approach to business, employment and legal matters will, over all, take you in the right direction. While each reader of this blogpost may be a “possible” customer for the Model Letters and Memos that we sell, that does not mean that, without “something more,” they are “prospective” customers.

Jessey, I hope this helps. As noted above, many people have the same concern, and now, hopefully, they will be able to “navigate” at work with a bit more information, insight and inspiration.

My Best to You,
Al Sklover

P.S.: One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Resignation Package” consisting of two Model Resignation Letters, a Model Involuntary Resignation Letter, a Memo to HR pre-Exit Interview, and our 100-Point Pre-Resignation Checklist. To obtain a complete set, just [click here.] Delivered by Email – Instantly!   

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