Savvy business owners should take steps to prevent departing employees from undermining their business. Not all employee-employer relationships will work out. As a business owner, you want to wish former employees well while stopping them from competing with your company using what they have learned working for you.
Your departing employees should not recruit other employees or entice your customers away. A Virginia non-solicitation agreements lawyer is available to discuss the benefits of these contracts. At Sparks Law, our knowledgeable attorneys can explain why you need restrictive covenants to dissuade your employees from pirating your employees and customers.
When employees are hired, restrictive covenants can be presented in employment agreements, in separate short agreements, or in the employee handbook. Generally, they restrict four actions after employees leave a position and seek work elsewhere. These include:
Restrictive covenants have been addressed in Virginia case law and continue to evolve as employees challenge them in court. To better understand a particular covenant in a non-solicitation agreement, consult a skilled Virginia attorney.
Guidance for restrictive covenants comes from the Virginia Supreme Court appeal Assurance Data Inc., v. Malyevac, 286 Va. 137 (2013). The court places the burden on the employer to show that restricting former employees must not go beyond what is necessary to protect legitimate business interests. Restrictions must be reasonable and fair and cannot stop employees from earning a living. This premise was tested in Omnisec International Investigations, Inc., et al. v. Slavica Stone, et al., CL 2018-6368 (2019) when the court ruled on a departing employee’s restrictions from soliciting customers and other employees. In the employment contract, the employee agreed not to solicit for one year after leaving the former employer any other employees or clients the employee worked with or knew were customers.
The court upheld both non-solicitation clauses (although it struck a non-disclosure clause for being vague). It ruled that the non-solicitation of other employees was not overbroad but reasonable because it protected the company’s interests and allowed the departing employee to seek employment anywhere.
The court also allowed the non-solicitation of customers provision because it was limited to only those the employee worked with, not all the company’s customers. The needs of the employer must be balanced with the needs of the employee. However, interpreting what is fair and reasonable can be subjective, so it is crucial to work with a seasoned local attorney when drafting a non-solicitation agreement.
Employers do not want employees leaving a job and taking key employees and customers with them. However, they also cannot present restrictive covenants that are too broad, preventing employees from finding future employment.
It is crucial to use language that addresses these concerns. For example, restricting solicitation to the customers an employee knows is more palatable than restricting solicitation of any past, current, or future customer known or unknown to an employee. The employee under a new employer would have to screen every customer and turn down customers who had ever patronized the former employer. The court would most likely find this restrictive covenant overbroad and strike it.
Employees sometimes leave for more suitable business opportunities, and although you hate to see them go, you want what is best for them. You hope they want the best for you and your business, too. However, overzealous employees sometimes try to take other employees and customers with them. There are ways you can prevent this and protect your company.
Restrictions on what departing employees can and cannot do should be written into employment agreements, as a separate agreement, or included in the company policy manual, which the employee can confirm has been read and accepted. Consult a Virginia non-solicitation agreements lawyer who can help you stop employees from pirating your other employees and customers. Call Sparks Law today to discuss your situation.