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Socially Aware Blog The Law and Business of Social Media

Employee Non-Compete and Non-Solicitation Agreements in the Social Networking Era

Posted in Employment Law

Employers have long used non-compete and non-solicitation agreements to prevent former employees from taking unfair advantage of confidential information, including client information, to which they received access during their employment. The growth of social media, however, is raising complex new issues for employers seeking to protect such company confidences from misuse by ex-employees. For example, if a former employee subject to a non-compete or non-solicitation agreement connects with a company client or former coworker on LinkedIn, could such connection result in a breach of the agreement?

Although there has been little definitive guidance from the courts to date, these issues have started to appear more frequently in litigation. In March 2010, for example, TEKsystems filed a lawsuit against a former employee for violating a non-compete and non-solicitation agreement based on her use of LinkedIn.  TEKsystems alleged that the former employee violated the agreement when she “connected” with one of the company’s contract employees on LinkedIn, asked whether he was “still looking for opportunities,” and invited him to “come visit [her] new office and hear about some of the stuff [they] are working on.” No ruling was issued, as the parties resolved the matter prior to adjudication; the case, however, is a reminder of just how easy it is for departing employees to connect with former colleagues and clients via LinkedIn and similar social media platforms, possibly in violation of their contractual obligations to former employers.

Employers seeking to enforce restrictive covenants may be interested to learn that at least one court has ruled that an ex-employee’s use of social media did violate a non-solicitation agreement. In Amway Global v. Woodward, a former employee argued that his blogs and website postings could not establish violations of the nonsolicitation agreement because “such passive, untargeted communications fail as a matter of law to qualify as actionable solicitations.” The Michigan district court rejected this reasoning, noting that “common sense dictates that it is the substance of the message conveyed, and not the medium through which it is transmitted, that determines whether a communication qualifies as a solicitation.”

The Amway court further confirmed that “communications qualifying as solicitations do not lose this character simply by virtue of being posted on the Internet.” Indeed, the Amway court found that the ex-employee’s posts could constitute a solicitation even where the hosting site’s readership is “diffuse and uncertain.” Specifically, in Amway, the posting was viewed by nearly 100,000 people and the court still found that it qualified as a solicitation.

Still, whether a particular use of social media can rise to the level of a “solicitation” is fact dependent. Just as a telephone call, email, or meeting can be appropriate or inappropriate depending on its substance, some social media communications will be in breach of
non-solicitation agreements while others will not. For example, in Amway, the court held that the former employee violated his non-solicitation agreement when he posted on his blog that he had decided to join a competitor and stated, “If you knew what I knew, you would do what I do.”  Although this posting was not directed at any particular individual, the court held that in light of its content, it “would readily be characterized as [a] solicitation” as it could clearly be read as an “invitation for the reader to follow his lead and join” Amway’s competitor. On the other hand, had the former employee simply posted a neutral announcement indicating his decision to join a competitor, it is unclear whether the Amway court would have deemed the ex-employee to be in breach of his non-solicitation agreement.

We note that the Amway court tailored its analysis to the language of the governing agreement and found that, because the agreement prohibited employees against “encourag[ing], solicit[ing], or otherwise attempt[ing] to recruit or persuade” others to compete, it was “immaterial” whether any such attempt to do so was successful. Thus, one way for employers to address the current ambiguity as to what kinds of social media use will violate a non-solicitation agreement may be to include a provision expressly prohibiting the use of social media for improper solicitation and outlining the prohibited conduct. If the agreement specifically prohibits the former employee from initiating contact with former coworkers or clients through social media sites such as LinkedIn, a court, as in Amway, may be more inclined to find that a simple request to connect breaches the agreement.

Further, as part of a broader trade secrets protection program, employers can use confidentiality agreements as a step toward avoiding the loss of trade secret status. In order to address the particular risk of proliferation of confidential information through social media, employers can maintain strong confidentiality agreements that incorporate provisions explicitly regulating employee social media use as it pertains to confidential information. Such agreements should make clear that such information is the employer’s property and is to be protected as such, especially online. Although there may be concerns about regulating employee social media use (e.g., free speech, concerted activity, and privacy law considerations that are outside the scope of this article), it is clear that employees have no greater right to breach a confidentiality agreement through social media than they otherwise would if not using social media. The bottom line is that the fact that an improper disclosure may occur through a blog or other social media service does not somehow exempt that disclosure from the reach of a lawful confidentiality obligation.

While social media presents new challenges to employers who seek to maintain the confidentiality of sensitive information and prevent unfair competition by departing employees, the legal issues arising in the context of social media in many respects are not so different from those we have seen in the past. These cases will likely continue to turn on the particular facts presented. With that said, certain themes appear to be developing:

  • First, while protecting confidential information as trade secrets may be more challenging with the proliferation of social media sites, employers
    can support their efforts to do so by using confidentiality, non-compete (where legally permitted), and non-solicitation agreements.
  • Second, having clear policies may help employers regulate social media use, particularly where such policies make clear that disseminating confidential information by posting online, including on their own accounts on sites such as Facebook and LinkedIn, is strictly prohibited.
  • Finally, an employee cannot do through social media what he or she could not do otherwise.

To quote from the Amway decision, “it is the substance of the message conveyed, and not the medium through which it is transmitted,” that carries weight.