Employment: Supreme Court Further Narrows Employer's Ability to Restrict Competition or Solicitation by Former Employee
We have known for some time that Oklahoma looks unkindly on restricting a person's ability to work. Other than a few exceptions (i.e., partnerships, sale of good will), Oklahoma law states that the only enforceable restriction an employer can place on a former employee is
the former employee [can]not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.
Prior to November 22, the courts could generally be counted on to rewrite contract provisions which might be broader than this so it would comply with the law and be enforceable. Well, those days may be over.
On November 22, the Oklahoma Supreme Court issued its opinion in Howard and Schneider v. Nitro-Lift Technologies. Here's what happened. Eddie Howard and Shane Schneider asked the court to declare that the non-competes/non-solicits they signed with Nitro-Lift were unenforceable. The provision they signed had three subparts describing different restrictions:
i) own, manage, operate, join, control or participate in or be connected with (whether as a director, officer, employee, agent, representative, partner, consultant or otherwise), or loan money to or sell or lease equipment to, any business or Person, which wholly or in any significant part, engages in . . . (a 'Competing Business') . . .
ii) for purposes related to any Competing Business or about whom employee has Confidential Information, canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from Nitro-Lift or its Affiliates any Person who or which is a past or present customer or supplier of Nitro-Lift or any of its Affiliates, or cause any such Person to curtail or cancel its business with Nitro-Lift or its Affiliates; or
iii) engage or employ, or solicit or contact with a view to the engagement or employment of any Person who is an officer or employee of Nitro-Lift or any of its Affiliates, or induce or attempt to influence any such Person to terminate his or her employment.
. . . To the extent that any part of this Section ... may be invalid, illegal or unenforceable for any reason, it is intended that such part shall be enforceable to the extent that a court of competent jurisdiction shall determinate that such part, if more limited in scope, would have been enforceable, and such party shall be deemed to have been so written and the remaining parts shall as written be effective and enforceable in all events.
Nitro-Lift's position - to the extent the contract was too restrictive, it asked the Court to rewrite it to make it enforceable.
Here's what the Court said. No.
The Court said that subsections (i) and (iii) would have to be stricken in their entirety as unenforceable. Subsection (ii) is too broad because it does not address only "established customers" but both past and present customers. The Court understood that the contract certainly intended to allow a court to rewrite any provision to make it enforceable, but the Oklahoma Supreme Court declined to do so, stating
We will not reform a covenant not to compete so offensive that it would require us to supply material terms. We hold that the breadth of the delineation required to bring the non-competition agreements into conformance and the necessity of adding at least one material term to the contract prevents judicial modification.
In short, the Court will not fix your contract when the errors are so egregious.
Your takeaway - if you are an employer who uses (or wants to use) non-compete/non-solicit agreements for Oklahoma employees, you may want to consider limiting the language to strictly comply with Oklahoma law.
By Kristen L. Brightmire, firstname.lastname@example.org