Dealing with departing employees can be tricky. That’s why many companies require certain employees — particularly those with access to confidential or proprietary company information or customers — to sign written agreements that prohibit them from engaging in various acts of unfair competition after they leave the company.
While Oklahoma law looks favorably on confidentiality and anti-raiding agreements, employers often run into trouble with other types of restrictive covenants. For example, in the employment context, non-competition agreements that prohibit an employee from going to work for a competitor are statutorily prohibited. On the other hand, non-solicitation agreements — agreements that prohibit employees from soliciting customers or clients of their former employers — are permissible, but only if the agreement prohibits the “direct” solicitation of “established customers.” Oklahoma courts have generally required strict compliance with these two limitations on non-solicitation agreements. That trend continued in a recent case from the Oklahoma Court of Civil Appeals.
The temporary restraining order in Autry v. Acosta, Inc.
While employed at Acosta Foodservice in Oklahoma City, Carrie Autry signed a confidentiality agreement and a non-solicitation agreement. Her non-solicitation agreement stated that, for 12 months after leaving the company, she shall not “directly or indirectly, engage in the business of selling, soliciting, or promoting the sale of the Clients that [Autry] represented while employed by Acosta.”
After Autry left Acosta to go work for a competitor, she filed a lawsuit in state court seeking a declaratory judgment ruling that her non-solicitation agreement was not enforceable because its language did not strictly comply with Oklahoma law. The company responded by seeking a temporary restraining order that prohibited her from using confidential information, from hiring employees away from Acosta, and from violating her non-solicitation agreement.
The trial court granted the company’s motion for a TRO, noting that Acosta was likely to prevail on the merits of its claims. It ruled that Autry should be prohibited from using any confidential information of Acosta and from attempting to hire away any Acosta employees. The pertinent part of the TRO for Autry’s appeal was that it prohibited her from “directly” soliciting specific clients of Acosta that were on a client list from 2016. The trial court reasoned that it could simply delete the word “indirectly” from Autry’s non-solicitation agreement and it would be enforceable. Autry appealed this portion of the TRO.
The appellate court’s decision
The Oklahoma Court of Civil Appeals (COCA) reversed the trial court, ruling that a restraining order was not proper because the non-solicitation agreement violated Oklahoma law and public policy. Specifically, COCA ruled that merely deleting “indirectly” from the non-solicitation agreement did not make the non-solicitation agreement enforceable. The court reasoned that since the agreement, as written, would prohibit Autry from soliciting clients she worked with at Acosta but were not current clients and had not been for some time, it was not limited to preventing solicitation of “established customers.”
Moreover, the court ruled that rewriting the agreement to define “established customers” would have been supplying a material term to the original contract. COCA determined that this was a definition that should have been negotiated by the parties when they drafted the agreement. In following Oklahoma Supreme Court precedent, COCA thus refused to “blue pencil” the agreement and, instead, invalidated the entire non-solicitation provision.
Takeaways for employers
This case provides several key lessons for employers. First, employers should review any non-solicitation agreements to ensure that they comply with Oklahoma’s narrow exceptions. If a non-solicitation agreement is not in technical compliance with Oklahoma law, there is a strong likelihood that the non-solicitation agreement will be invalid in its entirety, thus leaving former employees free to solicit all customers. It is notable that the TRO prohibited Autry from soliciting employees from a recent, specific customer list, but the appellate court reversed that decision since the underlying non-solicitation agreement was overly broad. Second, employers should take advantage of confidentiality agreements and anti-raiding agreements that prohibit former employees from trying to persuade former co-workers to leave. These are legal in Oklahoma. Moreover, those were part of the TRO in Acosta, but were not part of the appeal. Third, out-of-state employers with Oklahoma employees should also look at their non-compete and non-solicitation agreements. Many of these agreements contain clauses that select a different state’s law to apply to get around Oklahoma’s narrow exceptions. However, after the Acosta decision, Oklahoma employees may be able to argue that enforcing another state’s law violates Oklahoma’s fundamental public policy; thus, any non-solicitation agreement not complying with Oklahoma law is unenforceable.
- Autry v. Acosta, Inc., 2018 OK CIV APP 8, _ P.3d _