Non-Solicitation Agreement Missing Operative Language
Causes Litigation Headache for Employer
By: Kevin J. Greene, Maura A. Droney,
Labor & Employment Newsletter,
A recent Connecticut Appellate Court case underscores precisely why employers should ensure that their non-solicitation clauses comply with the requirements of Connecticut Law. In Hilb Rogal & Hobbs Co. et al. v. Randall, 115 CA 89 (2009), the plaintiffs, Hilb Rogal & Hobbs Company and Hobbs Group LLC, went through over three years of litigation with their former employee and defendant, Uta Peters Randall, over the enforcement of a non-solicitation agreement in an employment contract missing operative language.
The employment contract was signed by the defendant in October 1997 when the defendant had been employed by Hobbs for over ten years. The agreement included a non-solicitation provision which had two subparagraphs specifically outlining what an employee could and could not do during and after their employment with the company. However, the non-solicitation paragraph was without any promissory language and therefore did not set forth any express promise by the employee not to engage in the activities described in the subparagraphs. In 2002, Hobbs was acquired by Hilb, Rogal and Hamilton Company, which became Hilb Rogal & Hobbs Company. In connection with the transaction the defendant signed an acknowledgment and amendment agreement recognizing the original employment agreement and providing that it remained in effect. The acknowledgment and amendment repeated the language of the non-solicitation paragraph of the original employment agreement without mention of the paragraph's lack of promissory language.
In September 2005, the defendant informed the plaintiffs of her resignation effective in October 2005. In December 2005, the plaintiffs filed a complaint against the defendant for actively soliciting business from the defendant's customers after her employment in violation of the non-solicitation clause of the employment agreement. In January 2008, the trial court found that the defendant did not breach the employment agreement because the contract was missing the promissory words necessary to make provisions found under the non-solicitation paragraphs of the employment agreement enforceable. Additionally, because the plaintiffs failed to request a reformation of the contract to add the operative language, the court held that they could not supply needed language and make the contract enforceable. In April 2008, after the plaintiffs moved for articulation of the court's decision, the court explained that it did not find the non-solicitation paragraph ambiguous, but in the absence of the promissory language, the paragraph was meaningless.
The plaintiffs appealed the court's decision asserting that the court failed to enforce the plain meaning of the non-solicitation agreement in the employment contract. The plaintiffs argued that although the non-solicitation paragraph erroneously omitted prohibitory language, the non-solicitation obligations were evident in the context of the entire contract and the defendant had breached such obligations. Ultimately, the Appellate Court held that when interpreting a contract, the language should be read in light of the situation of the parties and the circumstances connected with the transaction. Additionally, the court stated that because contracts are construed as a whole all relevant provisions are considered when determining the intent of the parties.
Based on this reasoning, the Appellate Court found the non-solicitation agreement of the employment contract enforceable. The court held that despite the missing language from the non-solicitation paragraph, it was clear from the title of the employment contract, "Employment, Non-Solicitation, and Confidentiality Agreement," and the language of the non-solicitation paragraph, that the parties intended that the defendant would be prohibited from engaging in solicitation for the time period specified in the paragraph. Additionally, the fact that other paragraphs of the employment contract imposed fees for violations of the non-solicitation agreement evidenced that the non-solicitation paragraph was intended to prohibit certain conduct. The Appellate Court also held that "Because the intent of the non-solicitation agreement is plain from an objective reading of the contract, a request for reformation is not necessary to enforce the provision." Therefore, the employment contract did not need to be reformed in order for the court to supply the "obvious missing terms" that made the non-solicitation agreement enforceable.
Non-Solicitation agreements are an effective way for employers to ensure that their talented employees will not be recruited by competitors, and if they do leave, they will not compete directly against their former employer and company. Although the end result for this employer was a favorable one, it certainly was costly and time consuming for them. However, it is important that the agreement is drafted in a manner enforceable under Connecticut law while still providing the restrictions, guidelines and protections employers want and need. This case is an example of a situation where a poorly drafted contract resulted in headaches for all involved. At Halloran & Sage LLP, we routinely draft and review non-solicitation and non-compete agreements for employers to ensure that their agreements are tailored to their specific needs and enforceable under Connecticut law.