Most companies are familiar with Non-Compete clauses and routinely consider including them in Employment Agreements with new employees. However, clients in certain industries – like the creative sector – often believe they are not customary, and unwilling to make them a part of their culture. In those cases, a Non-Solicitation clause may be the right balance. A company that is not interested in barring former employees from competing by working for competitors can use a Non-Solicitation clause that will prevent former employees from directly, or indirectly, encouraging other employees to leave the company, hire an employee away from them, or even solicit existing clients of the Company without barring them from working for a competitor.
A recent decision out of the Michigan Court of Appeals reaffirmed the enforceability of such provisions. In RKA Petroleum Companies, Inc. v. Kratochvil et al, Case No. 324172 Mich Court of Appeals, April 14, 2016, the employee was bound to a “non-solicitation” clause in his contract and role as a Vice President of Information and Technical Services with RKA. The language of the Non-Solicitation stated that Kratochvil “will not, directly or indirectly, hire, solicit, or encourage to leave the Company’s employ any employee of he Company, or hire any former employee of the Company within one year of the date such person ceases to be a Company employee.”
Upon leaving the company, and prior to joining his subsequent employer, Atlas Oil Company, he engaged in correspondence that would be construed by the court as recruiting an RKA employee to join Atlas. The solicited employee first accepted the offer, and then rescinded it but RKA still sued its former employee on breach of contract theories. The Court of Appeals agreed that the clause was broadly worded to prohibit the Defendant in making any efforts to invite an RKA employee to leave RKA’s employ. The court stated these clauses “are designed to protect an employer’s investment in their employees and confidential information they maintain.”
The Appellate Court found the Defendant’s actions of sending a former co-employee an employment contract, discussing ways to hire her with one of his new colleagues, and calling her to discuss the offer, encouraging her to reconsider decision to rescind the offer of employment all violated the promise made in the agreement. The court vacated the lower court decision, which dismissed RKA’s claims against their former employee, and allowed the case to proceed on those theories.
The nuances of a Non-Solicitation Clause are a key part of protecting your company and your investment in your employees. Even when a “non-compete” may seem too drastic, there is a way to balance protecting your company with maintaining a relaxed corporate culture.
The business and employment attorneys of Dalton & Tomich take your business just as seriously as you do. Attorneys Zana Tomich and Noel Sterett are trusted by closely held family businesses and others across Michigan and Northern Illinois as invaluable partners and counselors. We guarantee all your calls and emails will be returned within one business day so you can focus on what you do best: running your business.
Having worked with Zana for 10 years, I can attest to her professionalism, her pragmatism, and most importantly, her integrity. I always get sound, thoughtful advice and guidance. From routine filings & updates to the highly unexpected, Zana’s there to help, always responding quickly and […]Read More
We highly recommend Dalton & Tomich! As a start-up firm that has rapidly grown across the country in under 5 years, Dalton & Tomich has been integral to our sound, credible, and excellent in standard infrastructure. As we’ve scaled, Zana has been right by our […]Read More
As a professional photographer in the wedding industry, reliable communication is very important to me. Noel was very knowledgeable and quick to respond to all of my questions and not just that, he also gave me suggestions when reviewing and updating my contract. The entire […]Read More
Zana’s expert guidance has helped us to move forward with clarity and confidence in our business endeavors. She helped us create a new business entity, and a few years later to navigate a tricky buyout—all with a clear path forward for business growth. Her calm […]Read More
Noel’s guidance was much appreciated when redrafting my client contract. He was very professional, respectful of my time and potential costs, and was sincere with his advice. I trusted that he had the highest good for my business in mind. I will seek out his […]Read More
Zana’s expertise in employee law has helped us refine and build a stronger operations and hiring strategy at my company. As a business owner of a small and fast growing company, I very much appreciate Zana’s ability to always step into any situation quickly and […]Read More