Based on an in-depth review of the dubious justifications courts have offered when enforcing co-worker non-solicitation covenants, this Article proposes that courts have too strongly favored employers against their former employees in such disputes.
A co-worker non-solicitation covenant is a contract term that prohibits a departing employee, for some period of time, from inviting his or her former co-workers to join him or her at a new job—or from encouraging a former co-worker to leave the company for any other reason. Some are worded so broadly that one could breach the contract by advising a colleague to leave a hostile or harassing workplace, or to seek higher pay. These covenants are ubiquitous in private sector employment agreements, at all income levels and occupations. They are frequently litigated, often alongside trade secret misappropriation claims. Courts often find violations based on communications with former co-workers.
Despite that ubiquity, co-worker non-solicitation covenants receive scant attention. Court rulings see little in the way of sustained analysis. Notwithstanding the wave of academic and legislative attention paid to employee non-competition covenants in recent years, the co-worker non-solicitation clause remains an afterthought.
This should change. Courts and commentators have overlooked how employers use co-worker non-solicitation covenants as a means to avoid giving employees raises or promotions, and to avoid improving workplace conditions. Employers’ litigation arguments that such covenants protect trade secrets, protect a company’s goodwill with its customers, or protect a supposedly “stable” workforce do not withstand critical scrutiny. These covenants operate first and foremost as salary suppression devices, not as an adjunct to trade secret law.
To understand how these covenants came to exist, this Article explores the long history of restrictions on hiring employees. Rather than a contract term that arose in response to contemporary workplace needs, the co-worker non-solicitation covenant is instead an anachronistic remnant of the paternalistic workspaces of late medieval England and otherwise forgotten labor control mechanisms from long ago.
Next, this Article offers the first comprehensive review of nationwide case law in this area, critiquing four common arguments employers offer for enforceability. Then, building on the insights of a small number of courts that have pushed back against such justifications, this Article proposes that courts reframe their adjudication of co-worker non-solicitation covenants. Courts should reject efforts to view these covenants as a category of trade secret law, and should reject other threadbare justifications. They should instead ask why employees want to leave the company, including whether better pay was available elsewhere, and they should examine the company’s attrition rates. By viewing disputes from the employee’s perspective and not just the employer’s perspective, and by considering broader empirical evidence of workplace conditions, courts can inject overdue skepticism.
Charles T. Graves,
Questioning the Employee Non-solicitation Covenant,
55 Loy. L.A. L. Rev. 959
Available at: https://digitalcommons.lmu.edu/llr/vol55/iss4/1