NON-SOLICITATION OF CUSTOMERS AGREEMENT UPHELD

The following reported case comes to us from the Circuit Court of Fairfax County (Virginia).

Daston Corporation developed, sold, and managed Google Apps in accordance with a nationwide license from Google. The individual defendants were the Managing Director and the Technical Director of Daston’s Software as a Service Practice. Upon commencing employment with Daston, these defendants/ex-employees signed identical agreements titled Non-Disclosure, Non-Competition/Solictation and Invention Assignment. The individual defendants employment with Daston ended on February 1, 2010, and they became employed by MiCore Solutions, Inc. MiCore provides a range of consulting and information technology services based on Google Apps and software, as well as other services.

Dalston filed suit against the former employees, seeking to enforce the nonsolicitation provision contained in their employment agreements. The employees filed a response arguing the nonsolicitation clause was unenforceable because it was overbroad and vague.

The Nonsolicitation of Customers clause in the Employment Agreement provided as follows:

B. Nonsolicitation of Customers. During the Employment Period, and for a period of two years following the termination of Employee’s employment . . . Employee covenants and agrees that Employee will not, directly or indirectly, solicit, invite or by any way, manner or means, attempt to induce any of Daston’s Customers to do business with a Competitor. “Customer” means any government agency, commercial entity or individual receiving the Services during Employee’s employment with Daston; except that where Daston provided Services only to a specific component of the governmental or commercial entity, “Customer” means the specific component of such entity.

The court upheld the non-solicitation of customers provision finding the nonsolicitation clause was no broader than necessary to meet the employer’s legitimate business interest. The clause applied only to a fixed universe of customers, namely those that existed during the employees’ term of employment. As part of senior management, it was reasonable to expect defendants to know who those customers were. Further, the nonsolicitation clause applied only to solicitations for services directly competitive with those provided by the employer.

My Take: I think this is a fair decision…the departing employees knew what they signed and the agreement was reasonable and not overly restrictive.

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Dan Frith

Dan Frith has over 25 years of experience representing individuals and families in cases of medical malpractice throughout Virginia. He has been named "Best Medical Malpractice Attorney" by Roanoker Magazine and is a member of the Million Dollar Advocates Forum. To speak with Dan, contact him by email at dfrith@frithlawfirm.com.