A non-solicitation agreement usually seeks to restrict solicitation of customers and/or employees. Those covenants’ functions overlap but are also different. Thus, we’ll refer here to “Customer Non-Solicits” and “Employee Non-Solicits.” A little history about both types is a good place to start.
Pre-2011
Non-solicit lawyers and courts generally agreed that Texas’s Non-Compete Act (the “Act”) covered Customer Non-Solicits. Thus, those Customer Non-Solicits were required to comply with Act as an anti-trust exception. But litigators and courts were uncertain whether the Act applied to Employee Non-Solicits. This uncertainty was significant because if Employee Non-Solicits were not covered by the Act, then the covenant was simply viewed as a contractual provision (not an anti-trust exception), which is a much lower bar for enforcement.
Post-2011
After Texas’s Supreme Court’s Marsh opinion, many litigators and courts began following the court’s logic to show that Employee Non-Solicits were also covered by the Act. Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011). Now, Texas courts appear to overwhelmingly support that both Employee Non-Solicits and Customer Non-Solicits are covered by the Act. See e.g., Ally Financial v. Gutierrez, No. 02-13- 00108-CV, 2014 WL 261038 (Tex. App.—Fort Worth Jan. 23, 2014, no pet.).
Key Considerations of a Non-Solicitation Agreement
To comply with the Act, a non-solicitation agreement must be carefully drafted. Specifically, there are five primary issues to cover.
Ancillary
Non-solicitation agreements must be “ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.” To be “ancillary to or part of” an otherwise enforceable agreement, the business interest being protected must be reasonably related to consideration given. See Marsh, 354 S.W.3d at 775. Thus, the covenants requires a protectable business interest for the employer (e.g., protecting confidential information) and consideration to the employee (e.g., confidential information, training, or goodwill). See Marsh, 354 S.W.3d at 775.
Scope
In addition, non-solicitation agreements require a reasonable scope of restrained activity. Tex. Bus. & Com. Code § 15.50(a). However, this “reasonable” determination varies on a case-by-case basis. For example, a restriction against soliciting all company employees was not reasonable in Forum US, Inc. v. Musselwhite, No. 14-17-00708, 2020 WL 4331442 (Tex. App.—Houston [14th], July 28, 2020, no pet. h.).
Geography
Non-solicitation agreements require a reasonable geographic restriction. Tex. Bus. & Com. Code § 15.50(a). Moreover, to comply with this restriction, careful drafting often considers where the employee works and locations of her customers (Customer Non-Solicit) and co-workers (Employee Non-Solicit).
Time
Lastly, non-solicitation agreements require a reasonable time restriction. Tex. Bus. & Com. Code § 15.50(a). This limitation is highly fact-dependent and requires looking at the rationale for the restriction and the business interest being protected.
In short, enforcing non-solicitation agreements may include demand letters, pre-suit litigation, lawsuits, and injunctions. Compared to non-compete covenants, courts have generally been more favorable to entering injunctions that enforce non-solicitation agreements. Furthermore, whether enforcing or defending, parties should consider issues such as confidentiality; counterclaims; related claims (e.g., fiduciary duty and tortious interference); and points raised on our other pages, such as trade secrets [HYPERLINK] and non-competes.
The Dallas employment lawyers at Rogge Dunn Group routinely draft non-solicitation agreements and litigate non-solicitation agreement lawsuits. To learn more about the non-solicitation agreement attorneys at Rogge Dunn Group, visit their attorney biographies here:
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