Oklahoma non-compete

All about Oklahoma non compete law – from the employer and employee perspective. Is your non compete enforceable? What can an employer do to protect itself from an employee taking it property or customers? Answers to these questions and more about Oklahoma non compete law.

Parsing the many meanings of the phrase “Oklahoma non-compete”

The phrase “Oklahoma non-compete” is thrown around quite often, indeed it is a popular Google search term.  Yet “non-compete” is often used to describe 4-5 separate employee restrictions without specifying whether it is intended to include all of or even any of the component parts of the phrase.

It is important to distinguish the type of restrictions we are discussing. Many people lump all employment restrictions under the broad term non-compete.  Below I break down what I see as the component restrictions often included in the phrase “Oklahoma non-compete”.  Then, I provide examples of contract language corresponding with each component part.  My purpose is to help you better understand and be able to parse the word “non-compete” when you encounter it.

Pure Non-Compete

There is the pure non-compete which prevents an employee from working in the industry. The pure non-compete, as I discussed in this blog post, is typically unenforceable under Oklahoma law.

Employee shall not, within a radius of fifty (50) miles from anywhere that Employer maintains an office or facility from which Employer’s business is then-conducted, serve as an incorporator, director, officer, partner, employee, manager, consultant, agent, independent contractor, advisor, stockholder or otherwise, or directly or indirectly own an interest in, provide any financing for, or perform any services for himself herself, or on behalf of any person, business, corporation, partnership~ entity or organization that directly or indirectly engages in competition with. the Business engaged in by Employer.

Non-Solicitation – employees & contractors

There is the non-solicitation restriction which generally prohibits a person from taking direct or indirect action toward an employee or contractor of the former employer, intended to convince the employee to leave their current employment and join a new venture.   Oklahoma law authorizes this type of employment restriction in this statute.
The Employee agrees and covenants not to directly or indirectly solicit, hire, recruit, or attempt to hire or recruit, any employee or contractor of the Company or any employee who has been employed by the Company in the 24 months preceding the last day of Employee’s employment (“Covered Employee”), or induce the termination of employment of any employee of the Company.

Non-solicitation – customers

There is the non-solicitation of customers restriction which prohibits a person from taking direct or indirect action intended to convince a customer of the former employer to join the former employee in a new business.

The Employee agrees and covenants, for a period of 24 months, beginning on the last day of the Employee’s employment with the Company, not to directly or indirectly solicit, contact, or attempt to solicit or contact, using any other form of oral, written, or electronic communication, including, but not limited to, email, regular mail, express mail, telephone, fax, instant message, or social media, including but not limited to Facebook, LinkedIn, Instagram or Twitter, or any other social media platform, whether or not in existence at the time of entering into this agreement, or meet with the Company’s current, former, or prospective customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.

Non-disclosure

The non-disclosure restriction prohibits a person from using or disclosing a former employer’s confidential information.
Except when directed in writing to do otherwise by EMPLOYER, and except as required by law, court order, or subpoena, EMPLOYEE shall keep confidential and shall not divulge to any other person or entity, during the time of the Agreement any Confidential Information.  In any case where EMPLOYEE is compelled by law, court order, or subpoena to disclose any Confidential Information to a third party, EMPLOYEE shall advise EMPLOYER in advance of such requirement and shall permit EMPLOYER to object, contest, intervene, and/or obtain appropriate protection of such information prior to disclosure to any person unless commanded by law officials or advised against doing so by legal counsel representing EMPLOYEE.
Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

Get on the right track for analyzing your Oklahoma non-compete agreement

image

Have you wondered if there is an easier path to begin the analysis of an Oklahoma non-compete agreement?  If so, you are in luck.

I have written extensively about Oklahoma non-compete agreements, non-solicitation agreements, non-disclosure agreements and related competition documents. Recently, it ocurred to me that there is a better to explain how Oklahoma competition law fits together.

Oklahoma public policy is decisively against non-compete agreements . . . that limit employees.  This directly in contrast to a couple of other areas where Oklahoma public policy expressly allows non-compete agreements.  Those areas are when partners make an agreement about how to handle the break-up of a partnership and if the goodwill of a business is sold.

Determining whether you fit into to the first or second scenario is about 99% of the battle in determining whether the non-compete restriction will be enforceable.  To best understand Oklahoma competition law, think of an analysis moving across two tracks:

 

  1.  Were you an employee when you signed the restrictive agreement?
  2. Were you an owner of a business when you signed the written agreement?

The answer to these questions determines your track.  If you are on tract 1, consider this post for some additional guidance.  If you are on track 2, consider this post for additional guidance.

 

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

While you were sleeping . . . Oklahoma non-compete law changed a bit

The New Law

While you were [probably] sleeping, Oklahoma law about non-compete agreements and non-solicitation agreements shifted a little bit.  The new law passed in May 2013 went into effect as of 12:00 a.m. today as Title 15 O.S. sec. 219B:

A contract or contractual provision which prohibits an employee or independent contractor of a person or business from soliciting, directly or indirectly, actively or inactively, the employees or independent contractors of that person or business to become employees or independent contractors of another person or business shall not be construed as a restraint from exercising a lawful profession, trade or business of any kind. Sections 217, 218, 219 and 219A of Title 15 of the Oklahoma Statutes shall not apply to such contracts or contractual provisions.

Regular readers of this blog know that non-compete related topics are a popular subject.

What does this mean?

Not nearly as much as you might think.  Similar to many laws that result from the political process, it appears to be “full of sound and fury” but ends up signifying . . . very little.  This law was passed in response to a decision from the Oklahoma Supreme Court that voided out an entire employee non-solicitation clause because it also prohibited hiring people that might seek employment on their own initiative and without any solicitation or inducement by past employees. In light of this decision, some people thought that all “anti-raiding” provisions might be unenforceable under Oklahoma law.

The practical effect

An employer and an employee (or independent contractor) can agree that when an employee leaves the employer, the employee will not try to hire away the employer’s other employees.  An employer may lose one employee, but that doesn’t necessarily mean there is going to be a mass exit of other employees.

The result of this new statute is that provisions that are in many sharply-drafted employment agreements are now “officially” enforceable (assuming they comply with the statute of course).

Daniel Joshua Salinas identified one other notable item about the new law in this blog post: the law permits restrictions on non-solicitation of employees but does not appear to limit the hiring of those people.

  An example

Here is an example of what a restrictive non-solicitation clause might look like in an employment agreement:

During the term of the Employee’s employment under this Agreement and for a period of twenty-four (24) months thereafter or, if longer, a period of twenty-four (24) months following the termination of the Employee providing any services to the Company, whether such termination be by the Company or by the Employee, the Employee will not directly or indirectly (i) recruit, solicit, encourage, or induce any employee of the Company or its affiliates to terminate such employment (ii) approach any such person for any foregoing purposes, (iii) otherwise disrupt any such employee’s relationship with the Company or its affiliates.

By the way, if you copy this language and use it in an agreement, you are doing so at your own peril and you will get no more than the value you paid for it :).

 

 

Posted by Shawn Roberts in Blogposts, Oklahoma Employment Law, Oklahoma non-compete

The Oklahoma Non-Compete Agreement in 10 [simple] slides

Have you ever wanted to know the basics of Oklahoma non-compete law but didn’t want to read 20 blog posts?

Oklahoma non-compete agreements are a frequent topic on this blog. I have written thousands of words about non-competes and related issues.

It occurred to me that since not everyone has time to comb through thousands of words, I could distill the main non-compete issues into a simple presentation. Check out the slide show below.


Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

Did you sign a “back-door” Oklahoma non-compete?

Oklahoma non-compete law in the employment setting remains crystal clear: Non-competes are unenforeceable except in a couple of narrowly defined circumstances. That doesn’t mean some people won’t continue to try to accomplish indirectly what cannot be done directly.

This is where the back-door non compete comes in. What is a back-door noncompete?

It is a contract clause that despite not expressly limiting the former employee from working, effectively creates a market so small, it is like being prohibited from competing. Consider this example:

Employee covenants and agrees that during the period of time while employed by SMITH CO, and for a period of two years after the date of termination of such employment, whether voluntarily or involuntarily, with or without cause, the Employee shall not directly or indirectly render widget-making services of any type, including, but not limited to, traditional and Internet, to any person or entity, that during the 24-month period
immediately prior to Employee’s termination of employment with SMITH CO:

 

  1. SMITH CO provided any services to such person or entity;
  2. SMITH CO offered to provide any services to such person or entity; and/or
  3.  Such person or entity requested SMITH CO to pitch or bid to provide any services.

Notice of a couple of things:

➜at first glance while the former employee is limited from providing certain services, the limitation appears to be itself limited.
➜however, the limitation is written so broadly that it could apply to nearly every customer or potential customer the former employee would encounter.
➜while the employee can open a business, she simply can’t talk with most of the universe of customers that might be natural prospects.

This is the back-door non-compete. Beware.

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

A look at how Oklahoma non-compete law fits together

Non Compete - super slim

Have you ever wondered what the Oklahoma Statutes would look like in a picture? You will find the answer below.

Sometimes it is easier to visualize rather than read complicated but interrelated topics. This concept even applies with the Oklahoma Statutes that cover Oklahoma non-compete law.

There are several statutes that make up Oklahoma non-compete law and they are laid out below in this handy diagram.

Restraint of Trade


Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

Did you sign this beast of an Oklahoma non-compete agreement?

 

Its one thing for an employee to have reasonable post-employment restrictions in an employment agreement, but this clause exceeds even the most zealous restrictions I have seen.

This clause arises out of the securities industry which from my experience is notoriously thorough and probing in areas such as competition.

6. No Interference with Business.
(a) The Employee hereby agrees that from the date hereof and for a period of twelve (12) months after the termination or expiration of the Employee’s services hereunder, however occurring (the “Restricted Period”), the Employee will not (other than as an Employee of the Company and on the behalf of the Company and its Affiliates), in any manner or capacity, directly or indirectly, through or on behalf of an Affiliate (as defined above) or otherwise, (i) render any Financial Services or any other service rendered by an of the Companies (the “Competing Services”) to any present or prospective client or customer of any of the Companies, (ii) interfere with the services of any of the Companies to any of their clients, including clients introduced by the Employee to any of the Companies, (iii) solicit, induce, influence or have any other business contact with any present or prospective client or customer of any of the Companies, or (iv) induce any client of any of the Companies, to terminate or modify and/or consider terminating and/or modifying his/her/their/its relationship with any of the Companies. For the purposes of this Agreement: (i) a “prospective client” or “prospective customer” shall be one that had been specifically identified during the term of this Agreement as a prospective client or customer and in respect of whom or which the Company or any of its Affiliates had undertaken some demonstrable initiative towards being retained to render Competing Services; and (ii) a “client” or “customer” shall be one who has purchased or received or has entered into an agreement to purchase or receive for himself, itself or others, any of the Competing Services from any of the Companies at any time during the twelve (12) month period immediately preceding the termination or expiration of the Employee’s services hereunder. Notwithstanding anything to the contrary in this Agreement or otherwise and with the exception of any and all previous and/or existing clients of Employee as set forth on the attached Exhibit E, regardless of whether services are performed through any of the Company’s Affiliates any and all clients serviced by the Employee pursuant to this Agreement shall be considered clients of the Company.
(b) The Employee further agrees that during the Restricted Period, the Employee will not directly or indirectly, communicate, reveal, disclose to anyone, or use or otherwise exploit for the Employee’s own benefit or for the benefit of anyone else, the terms of this Agreement, including without limitation, the compensation paid to the Employee hereunder and the other provisions of this Agreement. In the event Employee is no longer employed by Company, the Company will be agreeable to disclosing such information to potential employers related to salary and production information upon the request from Employee.
(c) The Employee hereby further agrees during the Restricted Period, the Employee will not in any manner or capacity directly or indirectly (through or on behalf of an Affiliate or otherwise) employ any employees or agents of any of the Companies to discontinue such employment or agency or other relationship with any of the Companies unless any of the Companies terminates any such employee(s) or agent(s) and grants the Employee prior written authorization to employ such employee(s) or agent(s).
(d) The parties acknowledge that rendering Financial Services can involve, as to certain clients or customers, close personal relationships and that it is not unforeseeable that upon a termination of the Employee’s services hereunder some clients or customers may on their own initiative elect to discontinue the relationship with any of the Companies and seek to continue a relationship with the Employee. The parties also acknowledge that it is not in either parties’ interest to have a client or customer of any of the Companies discontinue its relationship with any of the Companies because of the departure of the Employee AND have the Employee be precluded by the terms of Section 6(a) from continuing a relationship with such client or customer insofar as such result would amount to a loss by both parties. Therefore, the parties agree that in any case where (i) a client or customer of any of the Companies terminates its relationship with any of the Companies (a “Former Client”), (ii) such termination has not been encouraged, solicited, or induced by the Employee in violation of his undertakings under Section 6(a), and (iii) the Former Client retains the Employee, an Affiliate of Employee or any other company, partnership, firm, association, person or other business with which the Employee and/or any of the Employee’s Affiliates has an agreement relating in any way to Financial Services (a “Successor Advisor”), to render Financial Services, then the Employee agrees to pay to the Company (or its applicable financial services Affiliate) the fees and/or commissions payable or earned by the Former Client to the Employee and/or the Successor Advisor with respect to Financial Services rendered during the first twelve (12) months after the Employee and/or Successor Advisor is retained by the Former Client. Notwithstanding anything to the contrary in this Agreement or otherwise and with exception of any and all previous and/or existing clients of employee as set forth on the attached Exhibit E, regardless of whether services are performed through any of the Company’s Affiliates, any and all clients serviced by the Employee pursuant to this Agreement shall be considered clients of the Company. By execution of this Agreement, the Employee agrees that this provision shall be binding on any Successor Advisor. Finally, the parties acknowledge and agree that it can be difficult to ascertain the circumstances of a client’s departure and the damages Company might suffer. Therefore, the parties stipulate and agree that the provisions of this Section 6(d) are reasonably calculated to compensate the Company for losses it might sustain under these circumstances and that any such payment shall constitute liquidated damages and not a penalty. The Employee agrees that during the Restricted Period it shall permit the Company to review the Employee’s books and records, and those of any Successor Advisor, relating to the identity of his or its clients and customers in order to enable Company to assure itself of the due performance by the Employee of his obligations under this Section 6. The Company agrees that it shall exercise its rights hereunder at reasonable times during regular business hours and in a manner which does not unreasonably interfere with the conduct of the Employee’s subsequent activities, to the extent properly conducted by the Employee under this Section 6, or those of the Successor Advisor. Any persistent refusal to allow such review shall suspend the Employee’s rights to perform Financial Services for a Former Client (but not the Company’s rights to recover damages on account thereof).

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

4 questions you should ask before you sign that Oklahoma non-compete

Farm workers shoulder tools at end of day near Ripley, in the fertile Palo Verde Valley of the lower Colorado River region, May 1972

No one goes into a new employment situation believing it will end badly.  But the facts are that all relationships are going to end; from the time the relationship starts, the clock is ticking toward the end. And by its very nature, many times the *end* comes with difficulty.

For that very reason, you must consider the end before you sign a non-compete agreement. While in many circumstances, Oklahoma non-compete agreements are unenforceable, you must be painstakingly careful.

These questions are a starting place for understanding what you are getting yourself into by signing the non-compete agreement:

1⃣  What does the agreement prohibit me from doing?

2⃣  What can I still do if I sign the agreement?

3⃣  If I am terminated without a good reason is the non-compete still enforceable?

4⃣  How likely is my employer to enforce the agreement if I leave?

In the coming days I am going to discuss each question in more detail, so check back here when you have a chance.


Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

The Oklahoma non-compete Decision Diagram

While I frequently post about Oklahoma non-compete agreements, I rarely use graphics to illustrate my points. This post is one of those rare occasions. I created this diagram to illustrate the flow and process I might go through in analyzing an Oklahoma non-compete agreement.

The Diagram is by no means a replacement for consulting an attorney but it should provide a glimpse at the issues and decision-making for initial analysis of a non-compete agreement controlled by Oklahoma law. Enjoy.

Decision Diagram

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Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

Dissecting the Oklahoma non-compete statute phrase by phrase

If you have read this blog much, you have heard about Oklahoma non-compete agreements. The primary source of law on Oklahoma non-compete agreements is Title 15 O.S. section 219.A. To make the statute a little easier to read and to use, I am going to do a line by line (and at times phrase by phrase) breakdown of what it says and what it actually means. Let’s start with the text of the statute:

A. A person who makes an agreement with an employer, whether in writing or verbally, not to compete with the employer after the employment relationship has been terminated, shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.

B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.

A person who makes an agreement with an employer. . .
At the heart of most relationships is an agreement and with Oklahoma non-compete law it is no different: the employee and employee must agree, there must be a meeting of the minds and each side must give the other something of value (consideration). Without an agreement, the analysis need proceed no farther.

Whether in writing or verbally. . .
The agreement can (and should) be in writing or could even be verbal. However, it is very difficult to enforce a verbal agreement for the sale of a sofa, much less a restriction on a former employee’s ability to earn a living. Get it in writing.

Not to compete with the employer after the employment relationship has been terminated,
This part targets agreements that wipe out an employee’s right to work in a job or start a business that could cost a former employer money. An agreement doesn’t have to use the word “non-compete” if it has the effect of preventing an employee from working in the field for which he is trained and qualified.

Shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer.
As long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.

B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.
Perhaps the clearest language in the statute and remarkably clear and decisive for just about any statute.  A contract that has language that prohibits competition is void and unenforceable. “Void” is important because that means the language is meaningless and no one has to file a lawsuit to prove it. If the statute said “voidable” that usually means someone has to file a lawsuit challenging the language and get an order form the Court acknowledging the restriction is unenforceable.

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Posted by Shawn Roberts in Blogposts, Oklahoma non-compete