We routinely encounter language in North Carolina employment contracts that prohibits the employee from soliciting the company’s customers or prospective customers for a period of time following separation from employment, which can be a big issue in the banking industry. In many cases, this language appears to have been lifted from old contracts or from agreements written for use in other states. Attempts to broadly prohibit solicitation of prospective customers in North Carolina can risk invalidation of the agreement’s non-solicitation prohibitions.

In its 2009 decision Hejl v. Hood, Hargett & Assocs., the North Carolina Court of Appeals shed doubt on employers’ ability to prohibit a former employee from soliciting business from entities that do not have a business relationship with the company. This opinion echoes other North Carolina court decisions that have invalidated customer non-solicitation restrictions that do not define who is a customer and do not limit the restrictions to customers with recent business activity. However, the court in Hejl went beyond these limitations to question whether restrictive covenants that involve prospective customers can ever be considered enforceable.

Employers that feel that they must protect prospective customer relationships from solicitation by departed employees could try to narrowly define prospective customers, for example, to those whom the company has made a formal presentation to within a recent period of time and therefore has a reasonable expectation of business with in the near future. Even with these limitations, however, the inclusion of prospective customers risks potential invalidation of the entire customer non-solicitation restriction. Although a judge could exclude this language while preserving restrictions on soliciting active customers, he or she could also decide that including prospective customers results in the unenforceability of the entire restrictive covenant.

Jonathan Crotty
704.335.9041
jonathancrotty@parkerpoe.com