Most companies are familiar with Non-Compete clauses and routinely consider including them in Employment Agreements with new employees. However, clients in certain industries – like the creative sector – often believe they are not customary, and unwilling to make them a part of their culture. In those cases, a Non-Solicitation clause may be the right balance. A company that is not interested in barring former employees from competing by working for competitors can use a Non-Solicitation clause that will prevent former employees from directly, or indirectly, encouraging other employees to leave the company, hire an employee away from them, or even solicit existing clients of the Company without barring them from working for a competitor.
A recent decision out of the Michigan Court of Appeals reaffirmed the enforceability of such provisions. In RKA Petroleum Companies, Inc. v. Kratochvil et al, Case No. 324172 Mich Court of Appeals, April 14, 2016, the employee was bound to a “non-solicitation” clause in his contract and role as a Vice President of Information and Technical Services with RKA. The language of the Non-Solicitation stated that Kratochvil “will not, directly or indirectly, hire, solicit, or encourage to leave the Company’s employ any employee of he Company, or hire any former employee of the Company within one year of the date such person ceases to be a Company employee.”
Upon leaving the company, and prior to joining his subsequent employer, Atlas Oil Company, he engaged in correspondence that would be construed by the court as recruiting an RKA employee to join Atlas. The solicited employee first accepted the offer, and then rescinded it but RKA still sued its former employee on breach of contract theories. The Court of Appeals agreed that the clause was broadly worded to prohibit the Defendant in making any efforts to invite an RKA employee to leave RKA’s employ. The court stated these clauses “are designed to protect an employer’s investment in their employees and confidential information they maintain.”
The Appellate Court found the Defendant’s actions of sending a former co-employee an employment contract, discussing ways to hire her with one of his new colleagues, and calling her to discuss the offer, encouraging her to reconsider decision to rescind the offer of employment all violated the promise made in the agreement. The court vacated the lower court decision, which dismissed RKA’s claims against their former employee, and allowed the case to proceed on those theories.
The nuances of a Non-Solicitation Clause are a key part of protecting your company and your investment in your employees. Even when a “non-compete” may seem too drastic, there is a way to balance protecting your company with maintaining a relaxed corporate culture.