Monday, December 17, 2018

Non-solicitation agreements are not a license to steal an employee's already existing customers

Hall v. Edgewood Partners Ins. Center (6th Cir. 12/14/18) [pdf] asks a question that we see arise often in litigation with former employees over restrictive covenants—can an employer limit an employee's access to customers, clients, or other contacts that the employee had prior to the employment.

Or, to put it another way, who owns an employee's pre-existing book of business, the employee or the employer?

The answer:

An employer cannot prevent its employee from soliciting clients that the employee acquired on his own. Those clients belong to the employee, so to speak, and employers have no legitimate interest in protecting such clients from competition.

An issue that employer get wrong way more than they get it right when dealing with salespeople and other client-facing employees. And one that has bona fide consequences in the enforcement of a post-employment non-solicitation agreement. An employee can use such an agreement to capture the fruit of an employee's labor for that employer, but customer and clients that the employee gained through prior employment belong to the employee, no matter what an agreement might say.

* Photo by Emily Morter on Unsplash