In Texas, client non-solicitation agreements are subject to the same rules as non-compete agreements. Therefore, they must be “reasonable” and “not impose a greater restraint than is necessary to protect the goodwill or other business interest” of the employer.
Client non-solicitation agreements can be used in addition to the non-competition restraints or instead of them. Thus, employers have a choice to use both or either of these: (1) a non-competition clause, which prohibits employees from competing with the employer in a certain geographic area; or (2) a non-solicitation clause, which prohibits employees from doing business with certain clients, but leaves them free to compete with the former employer in any geographic area.
A customer non-solicitation clause can look something like this:
The Executive recognizes the Corporation’s legitimate interest in protecting, for a reasonable period of time following the termination of the Executive’s employment, those Corporation accounts with which the Executive will be associated during his employment. Accordingly, the Executive understands and agrees that for a period of two (2) years following the termination of his employment for any reason whatsoever, he will not, directly or indirectly, solicit, place, market, accept, aid, counsel or consult in the renewal, discontinuance or replacement of any insurance (including self-insurance) by, or handle self-insurance programs, insurance claims, risk management services or other insurance administrative or service functions for, any Company client for which he performed any of the foregoing functions during the two-year period immediately preceding such termination.
Generally speaking (but there are exceptions), Texas courts agree on the following rules for customer non-solicitation agreements:
- non-solicitation agreement cannot prohibit a former employee from soliciting clients with whom he had no dealings during his employment.
- two-to-five year restrictive period for non-solicitation is reasonable.
CONCLUSION FOR EMPLOYERS: Adding a solid customer non-solicitation clause in employment agreements is a no-brainer, especially for those employees who frequently interact with the company clients and have the potential of influencing them to follow the employee to his or her new employer.
Enforcement of such clauses via injunctive relief requires finesse as employer must maneuver between enforcing the clause and protecting its business interest and preserving the customer goodwill.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.