What is LinkedIn? Almost everyone is aware of LinkedIn the business-related social networking site with reportedly over 100 million registered users. Business folks use the site to find jobs, people and business opportunities.
What is a Non-Solicitation Agreement? This type of agreement is usually entered into between an employee and his/her employer. The agreement typically prohibits the employee from leaving the employment relationship and taking co-workers or clients/customers to his/her new employer…sort of an “anti-pirating” agreement. However, companies who work together on certain projects can, and often do, enter into these agreements.
What is the connection between LinkedIn and Non-Solicitation Agreements? We see situations in which two companies who work together on specific projects enter into a Non-Solicitation Agreement which prevents each company from hiring away the other company’s talented employees.
The interesting part of the story is how creative the company doing the hiring can get in getting around a Non-Solicitation Agreement. Can the hiring company just place an advertisement in the “Help Wanted” section of the classifieds and hire any responding employee from the other company to the Non-Solicitation Agreement and argue “we didn’t solicit your employee…she just responded to a “Help Wanted” advertisement in the newspaper? Can the hiring company circumvent the Non-Solicitation Agreement by using the business-related social network LinkedIn? I don’t know the answer to the first question but we may now have an answer to the second question.
The case is Enhanced Network Solutions Group, Inc v. Hypersonic Technologies Corp. decided by the Indiana Court of Appeals on June 30, 2011. Enhanced developed software, and had a relationship with Hypersonic, which modified existing software. The two companies often jointly bid on projects together and were parties to a Non-Solicitation Agreement. In short, the Non-Solicitation Agreement provided that both companies were to…refrain from soliciting or inducing, or attempting to solicit or induce, any employee of the other Party in any manner that may reasonably be expected to bring about the termination of said employee toward that end . . . .
And guess what happened next? Hypersonic posted an open position for an outside sales representative to “its LinkedIn webportal.” An Enhanced employee saw the posting and informed the President of Hypersonic that he was interested. After this, the employee met with Hypersonic’s owner and hammered out a deal. Hypersonic then filed a complaint for declaratory relief regarding the enforceability of the agreement between Hypersonic and Enhanced.
The court looked to the dictionary definitions of the “solicit” and “induce” and concluded that Hypersonic did not solicit or induce the Enhanced employee to terminate his relationship with Enhanced. Interestingly (and correctly to my way of thinking), the court noted the agreement precluded Hypersonic from soliciting applications, but nothing prevented Hypersonic from talking to Enhanced employees if they reached out to Hypersonic.
My Take: This issue is far from settled but I think the Indiana Court of Appeals got it right. For a further discussion on this topic and the court’s ruling, check out the Technology and Marketing Law Blog written by Eric Goldman.