The Employer's Legal Resource: Oklahoma Court Requires Strict Adherence to the Statute on Non-Solicitation Provisions
In many areas of the law, things are similar from state to state. Certainly, federal laws help ensure laws are similarly applied regardless of location. This is why we can look to other states when we talk about things such as race or gender discrimination. They are governed by Title VII, a federal law. On the other hand, there are areas of employment law that differ dramatically from state to state. The manner in which an employer can restrict an employee after separation is one such area.
While many states favor an employer's right to reasonably restrict a former employee's actions after termination (e.g., non-competes, non-solicits), Oklahoma does not. Oklahoma favors the right of individuals to work in the profession of their choice over the rights of an employer. In fact, in Oklahoma, most non-competition agreements are simply void. In other words, you cannot (even with a contract) forbid someone from competing with his former employer unless a specific statutory exception applies; generally speaking involving the sale of goodwill or as to partners upon, or in anticipation of, dissolution of a partnership.
In 2001, the Oklahoma Legislature passed a specific law designed to strike a balance between the rights of the individual to work and the concerns of businesses. That law reads:
A. A person who makes an agreement with an employer, whether in writing or verbally, not to compete with the employer after the employment relationship has been terminated, shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.
B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.
15 O.S. § 219A (emphasis added). Provisions in contracts under this law are referred to as non-solicitation provisions. The person can still work – even for a competing business – but simply cannot "directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer." In many ways, this law has been attacked as too limited. For example, it is of no use to employers of highly technical employees who may have significant value and may be capable of causing significant harm if employed by a competing business, but who do not "sell" anything. Nevertheless, this is the law.
Since the law's passage, employers have attempted to determine how far they could push the boundaries and still have a provision that would not be declared "void and unenforceable" under subsection B.
On February 7, the Oklahoma Court of Appeals issued one of the few reported decisions we have on the law. In Autry v. Acosta, Inc., 2018 OK CIV APP 8, Autry brought a lawsuit seeking a declaratory ruling from the court that the contract she signed with former employer Acosta was unenforceable. Acosta countered with, among other things, a request for a temporary injunction against Autry based upon the non-solicitation provision. The trial court granted the requested temporary injunction against Autry, and Autry appealed.
On appeal, the Court looked critically at the non-solicitation provision in the contract which read: "Employee agrees that for a period of twelve (12) months following termination by Employee, for any reasons, including resignation, or by Acosta for Cause, Employee shall not, on Employee's own behalf or on behalf of others, in any capacity whatsoever, including, without limitation, as an owner, salesperson, sales manager, consultant, or otherwise, directly or indirectly, engage in the business of selling, soliciting, or promoting the sale of the Clients that Employee represented while employed by Acosta." (Emphasis added.)
The appellate court noted the following problems with Acosta's non-solicitation provision:
- Acosta's contract prohibits "indirect" solicitation which is broader than Oklahoma law, which is limited to "direct" solicitation.
- Acosta's contract prohibits Autry from engaging in the "business of selling, soliciting, or promoting the sale of â€¦" which is broader than Oklahoma law which addresses only solicitation of the sale of goods or services or a combination thereof.
The appellate court noted that Oklahoma law states that "[a]ny provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable." 15 O.S. § 219A(B) (emphasis added). It found that, in earlier cases, this language was used to invalidate non-solicitation provisions which went beyond the language of the statute. (E.g., prohibiting solicitation of past or prospective customers was beyond scope of "established" customers). The appellate court found the provision was void and unenforceable, and it reversed the temporary injunction entered by the trial court.
Bottom line, Oklahoma courts will require strict compliance with § 219A in order to enforce any non-solicitation provision against an Oklahoma resident. Oklahoma employers should carefully draft any non-solicitation provision with an employee such that its language mirrors § 219A.
[Please note the discussion applies to Oklahoma law only. With the prevalence of out of state employers and Oklahoma employees or vice versa, drafting, interpretation, and enforceability issues can be quite complicated. Before making decisions on matters in which one or more parties are outside Oklahoma, you should consult legal counsel.]
By Kristen L. Brightmire, email@example.com