In a recent decision out of the Western District of Virginia, the enforceability of non-solicitation agreements was put to the test. Judge Glen E. Conrad upheld verbiage prohibiting a former Edward Jones financial advisor from soliciting clients of his former employer, which, upon a showing of unrefuted evidence that $42 million dollars was transferred, he was found to have done. Judge Conrad granted a temporary restraining order on the issue, explaining that such an order is an “extraordinary remedy,” and requires a “clear showing” that a plaintiff is entitled to it. Edward D. Jones & Co. LP v. Clyburn (VLW 020-3-422).
A non-solicitation agreement is a less restrictive version of a non-compete, which prohibits former employees from competing against their former employer. Non-solicitation agreements are intended to prevent former employees from soliciting their former employer’s clients and they are typically less restrictive than non-competes because of their narrow focus.
A common misconception surrounds the enforceability of non-solicitation clauses. In Virginia, non-solicitation agreements are enforceable, but only if they are narrowly drafted to safeguard the employer’s legitimate business interests, are not unduly burdensome, and are not against public policy.
The Clyburn case demonstrates the type of non-solicitation clause and the type of evidence needed to prove a violation of such a clause that the law will protect. The clause in question limited the non-solicitation period to during employment and one-year post-termination of employment, specified the modes by which the employee was prohibited from using to contact the employer’s clients, specified which clients were protected under the clause, and importantly, it described what it meant to “solicit” the employer’s clients. The evidence that the plaintiff presented was in the form of detailed affidavits regarding four specific clients that the defendant attempted to convince to switch firms. Judge Conrad was unpersuaded by the defendant’s hearsay argument and his argument that harm could be cured in the required arbitration proceedings.
With the granting of the temporary restraining order, Clyburn is enjoined from further solicitation of Edward Jones clients pursuant to his contract. This ruling has two salient points. First, employers should draft contracts with carefully chosen non-solicitation language to protect their clients from former employees. Second, employees bound by non-solicitation agreements should expect courts to uphold those valid agreements in court at the preliminary injunction phase.
If you have questions regarding non-solicitation clauses in your contract, or need help drafting contracts with non-solitication clauses, please don’t hesitate to reach out to Winslow & McCurry at (804) 423-1382 or info@wmmlegal.com to schedule a consultation.
