Lexology (02/21/12) Roy A. Ginsburg

Suppose a company in a highly competitive industry requires its sales staff to sign a noncompete or nonsolicitation agreement. Several of the company’s sales staff have joined another company that is not a competitor. However, this other company seems to be recruiting the first company’s staff. Does the first company have a legitimate claim based on the restrictions in the nonsolicitation agreement? The short answer is “maybe.”

First, a legitimate claim would be based on several factors, such as state law. Some states would side with the employer, but California and North Dakota, for example, likely would not. Second, the governing state law may be determined by the contract, provided there is a choice-of-law component in the agreement. But even if there is, some courts may decide against enforcing it.

Third, the language of the agreement itself may be a factor. Some courts take the language of nonsolicitation agreements quite literally, so prohibitions on “soliciting,” “inducing,” “convincing,” or “persuading” may be interpreted differently. Other nonsolicitation agreements may be so broadly worded that the company seemingly is prohibiting any interaction, even social interaction between two people who may have known each other for a long time. This kind of language may provide the former employee with an opportunity to contest the validity of the agreement.