I Can't Call Who? Employee Nonsolicitation Of Clients Covenants Under New York Law

1. Introduction

   The situation happens with regularity: an employee's employment ends, for any of a variety of reasons. The employee's first thought is to get another job, call the clients of his former employer, many of whom have closely worked with him, and get back in the swing of business. Perhaps some of those clients have even called him already, offering sympathy, or asking his future plans. But in the stack of departure papers given to the employee, there is a reminder to abide by a nonsolicitation covenant contained in a governing employment document, often executed years prior. The employee and the employer, not surprisingly, often have contrary views on the applicability and enforceability of such a covenant; those contrary views can often lead to conflict and eventually, litigation.

   Battles over nonsolicitation covenants are not personal vanity or blind pique. Personal contacts, both with clients and fellow service providers, comprise an increasingly valuable component of an employee's overall worth. As the American macroeconomic model has skewed toward high-value services rather than blue-collar labor, the value of an employee's contacts with clientele has dramatically risen. That value is often noted by employers, who seek to retain, as best as possible, the value of the employee's contacts long after he or she departs. With employee mobility as high as ever, the validity, enforcement, and interpretation of nonsolicitation covenants has accordingly increased in importance.

   Despite the importance of solicitation, the focus of restrictive covenant litigation and scholarly and industry commentary remains on noncompetition, rather than nonsolicitation covenants. Employers have traditionally included — and employees have traditionally focused on and fought — noncompetition covenants, and so the lion's share of restrictive covenant litigation has turned on the interpretation of noncompetition covenants. While an entire doctrinal field has developed in response, the interpretation of nonsolicitation covenants has languished behind; nonsolicitation covenants have not been considered nearly as significant a focus of doctrinal law or practical interpretation. Yet, given both the new economic paradigm, and the disinclination of courts to deprive workers of their economic mobility, we can expect a new surge of focus on the protection of the employer's interests through the use of nonsolicitation, rather than noncompetition covenants. Accordingly, employees who sign agreements containing nonsolicitation covenants, and the employers who use them, should pay close attention to the prospective application of the words on the page.

   By the careful study of New York common law, this article answers some practical questions commonly asked by both employers and employees and in so doing, provides a framework by which drafters of nonsolicitation covenants can focus adroitly on the impact of the drafted words so as to best protect the interest of their respective clients. For purposes of this article, we are focused entirely on nonsolicitation covenants in employment agreements or other governing employment documents, rather than on covenants which may apply in to the sale of a business or between entities, such as in a non-disclosure agreement.

2. What Is a Nonsolicitation Covenant?

   Before we can discuss the parameters, we need to know what we are discussing in the first place. A nonsolicitation covenant, broadly, prohibits employees from soliciting or interfering with the relationship between the employer and the employers' workers and customers after the termination of employment. By way of example, a basic provision may state something along the lines of, "I agree that during my employment, and for one year thereafter, I shall not, without the written permission of the...