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Reminder: North Carolina Customer Non-Solicitation Agreements Must Carefully Define Protected Relationships

  • 05/29/2019

As an alternative or in addition to a traditional non-competition covenant, many employers require sales and other workers to agree not to solicit the business of their customers for a period of time following departure from employment. When using these customer non-solicitation agreements with North Carolina employees, employers need to pay particular attention to the definition of protected customer relationships.

North Carolina courts have repeatedly held that prohibitions against contacting any of the company’s customers are overbroad and unenforceable. As an alternative, many agreements now limit the solicitation prohibition to only those customers with whom the employee had material contacts within the past year or so, or those for whom the employee possesses confidential information that would provide an unfair advantage.

In a recent North Carolina Business Court decision affirmed by the North Carolina Supreme Court, the court threw out a customer non-solicitation restriction because the definition of confidential information contained in the agreement was so broad that it basically applied to any customer for whom the employee may have encountered any kind of information regarding. The court then refused to “blue pencil” (or judicially delete) the confidential information restriction in favor of the material contact one, because the employer used the conjunctive “and/or” between the two factors, and not simply “or.”

These decisions point out the increasingly difficult task North Carolina employers face when seeking to enforce post-employment restrictive covenants. Court are increasingly using technical drafting issues to invalidate agreements, and decline to remove the offending language in favor of the remaining restrictions. Old (meaning more than a few years) employee non-solicitation agreements likely contain language no longer considered enforceable in North Carolina. To have any realistic hope of upholding their terms, employers should periodically review and reissue restrictive covenant agreement to comply with the latest judicial pronouncements.