No More Playing Cute With Non-Solicitation Obligations: First Circuit Court of Appeals Rejects "Customer Called Me First" Argument

Non-solicitation agreements now may have more teeth in Massachusetts. This week, in Corporate Technologies, Inc. v. Harnett, the First Circuit Court of Appeals allowed to stand an earlier injunction prohibiting Brian Harnett, a former employee of Corporate Technologies, from conducting business with Corporate Technologies’ customers. The First Circuit rejected the idea that Harnett could circumvent his non-solicitation obligations by piquing his former customers’ curiosity and inciting them to make the first contact with him at his new job.

Many employers have heard this story before. Employers who call foul on a former employee’s solicitations are met with the same response time and time again: “I didn’t solicit anyone. I merely let them know that I moved. They called me.” The story was no different here. Harnett left Corporate Technologies and promptly sent out a blast e-mail to a targeted list of prospects, nearly half of whom were current or former Corporate Technology customers, notifying them of his new job. In response to his blast e-mail, several of those customers reached out to Harnett. From there, Harnett continued face-to-face and e-mail communication with those customers.

The First Circuit squarely rejected Harnett’s story explaining that no per se rule exists that a non-solicitation obligation is extinguished when a client—rather than a former employee—makes the initial contact. Rather, who makes the first contact is just one of a series of factors to consider in determining whether the employee violated his or her non-solicitation obligation.

For one, an “initial contact” could range from a simple call to say hello all the way to a call to place an order with the employee’s new employer. Also, the importance of who makes the initial contact varies across industries. For instance, if an industry involves the sale of off-the-shelf goods, the initial contact could very well result in a sale and is, therefore, significant. But, where an industry involves more complex, customized products (as it did in Harnett’s case), initial contact is likely many steps removed from closing a sale.

The Harnett decision does not bode well for the former employee who plays cute with his or her non-solicitation obligations. But before taking the Harnett position to the bank, Massachusetts employers should beware that Massachusetts state courts are not required to follow the Federal First Circuit’s decision. Indeed, Massachusetts state courts thus far have failed to reach any consensus regarding the proper interpretation of non-solicitation agreements in these types of initial contact cases. We will monitor the Massachusetts state courts for any reactions to the Harnett decision and keep you posted. In the meantime, employers should define "non-solicitation" broadly in their restrictive covenant agreements to effectively prohibit former employees from connecting with the employer's customers, including by prohibiting the former employee from responding to an initial contact by the customer.

 

Topics:  Compliance, Enforcement, Non-Solicitation Agreements

Published In: Civil Remedies Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin - Employment Matters | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »