Practically all businesses rely on their ability to find new customers and maintain existing ones. In some businesses, customers may be more devoted to a specific employee than they are to the business itself. In these situations, the business may struggle to survive when a key employee departs.
To prevent departing employees from taking away existing or future business, a company may have its employees sign a noncompete and/or a nonsolicitation agreement. You’ve probably heard of these terms before, as they’ve been around for a while. But the rise of social media has made it easier for individuals to unwittingly run afoul of these agreements.
Let’s begin by explaining what these agreements are and how they work.
Noncompete and Nonsolicitation Agreements
Quite often, an employee who signs a noncompete agreement also signs a nonsolicitation agreement. Therefore, it’s understandable that many people think of these agreements as interchangeable. However, they are different.
A noncompete agreement prohibits an employee from working with a direct competitor or otherwise engaging in business operations that directly compete with the employee’s former company. For a noncompete agreement to be enforceable, its restrictions must be reasonable. Generally, a noncompete should only be in force for a reasonable period of time within a limited geographic area.
A nonsolicitation agreement doesn’t prohibit the departing employee from working for a direct competitor, but it does prevent the employee from soliciting current clients and employees from the former company.
Let’s use a hairdresser at a hair salon as an example to illustrate how these agreements work. In our example, Rachel works for ABC Hairstyling. She does a great job and accumulates a large number of clients who come to ABC Hairstyling just to have Rachel work on their hair. After many years at ABC Hairstyling, Rachel decides to leave.
If Rachel is subject to a noncompete agreement, she cannot work at a neighboring hair salon or start her own salon unless she leaves the geographic area where ABC Hairstyling operates. These restrictions will last for a set period, such as one year.
If Rachel is subject to a nonsolicitation agreement but not a noncompete, she can start her own hair salon (or work for another salon) wherever and whenever she wants. However, she can’t solicit co-workers to come with her or solicit her ABC Hairstyling clients to follow her to her new salon.
Note that the nonsolicitation agreement doesn’t actually prevent a client from continuing to see Rachel for haircuts. But because Rachel is not allowed to solicit existing clients, there’s no practical way for a client to track her down. ABC Hairstyling has no reason to tell clients where Rachel has set up shop. That would be throwing business not just out the door but to a direct competitor.
However, social media has made it all too easy to solicit business in violation of a nonsolicitation agreement. Let’s look at a real-world example: the case of Mobile Mini, Inc. v. Liz Vevea and Citi-Cargo & Storage.
The Facts of the Mobile Mini Case
Liz Vevea was a sales representative for Mobile Mini, Inc. As a condition of her employment, Vevea had to sign a Confidentiality, Nonsolicitation, Noncompete, and Inventions Agreement. If Vevea left Mobile Mini, that agreement would prohibit her from doing two key things:
- working in the portable storage business within 50 miles of Mobile Mini for a period of six months and
- selling or soliciting any portable storage services from existing Mobile Mini customers for 12 months.
Vevea did leave Mobile Mini on November 8, 2016. She waited until May 11, 2017, to update her LinkedIn social media account to reflect her new job at Citi-Cargo & Storage, a direct competitor to Mobile Mini. Besides changing her profile status, Vevea touted her new employer’s storage services and asked that any interested individuals contact her directly for a quote.
About a week later, Vevea made another LinkedIn social media post, again advertising Citi-Cargo’s storage services and giving her contact information. These posts went to over 500 LinkedIn connections that Vevea had established, including many of her former clients from Mobile Mini.
A few days later, Mobile Mini sued Vevea and Citi-Cargo, requesting a variety of remedies, including a preliminary injunction. A preliminary injunction is a form of equitable relief that stops a party from engaging in certain conduct (or, occasionally, compels it to continue a course of conduct) until an underlying legal action can be decided.
What Did the Court Do?
In its request for a preliminary injunction, Mobile Mini asked the court to extend the 6- and 12-month time limits on Vevea’s noncompete and nonsolicitation agreement. The court refused to grant this request, but it did order Vevea to delete any of her LinkedIn posts advertising Citi-Cargo’s services. The court also ordered her to stop making additional solicitation-related posts on LinkedIn or any other social media sites where Mobile Mini’s customers might be able to read them.
The court reached this decision because it concluded, contrary to what Citi-Cargo and Vevea argued, that the LinkedIn posts were not merely job status updates providing new employment and contact information. Instead, those posts were made with the primary purpose of inviting members of Vevea’s LinkedIn network to contact her and ultimately purchase services from Citi-Cargo.
Summing It Up
- A noncompete agreement prohibits a former employee from working in a business that directly competes with the former employer.
- A nonsolicitation agreement prevents a former employee from soliciting clients from the individual’s former company.
- A nonsolicitation agreement may also stop the former employee from taking co-workers with him or her to another company.
- Courts will usually enforce noncompete and nonsolicitation agreements as long as there are reasonable time and geographical limitations on them.
- Due to the expansive reach and interconnectedness of social media, individuals can easily—even if unintentionally—violate a nonsolicitation agreement by posting marketing information on their LinkedIn or other social media account.
For additional information about noncompete agreements, please read our blog post “What to Do When Your Employer Asks You to Sign a Noncompete.”
Are you subject to a noncompete or nonsolicitation agreement? Are you struggling to understand what you can and can’t do when leaving your employer? Or have you already left and now you’re being accused of violating one of those agreements? Please contact our office if you’re in any of these situations. We’d be happy to help you navigate the best, and safest, course of action.