November 16, 2017 Articles

Battling Non-Solicitation Clauses in Employment Agreements in the Social Media Age

By Michael Skapyak

The social media revolution needs little introduction. Since the proliferation of Facebook in 2006, other social media sites such as Twitter, Instagram, LinkedIn, and Snapchat have gained popularity and spread information instantly. As technology advances, people, particularly millennials, spend an increasing amount of time interacting through social media platforms. It's estimated that the average person currently spends around two hours per day on various social media sites. Evan Asano, "How Much Time Do People Spend on Social Media?," SocialMediaToday, Jan. 14, 2017. Consequent to this obsession, the use of social media has become vital for businesses. Enterprises have become millennial-conscious and employ creative uses of social media for sales and promotion and to facilitate consumer interaction.

Correlated with the increased use of social media is the increasing turnover rate for millennial employees. Dubbed the "job-hopping generation," millennials are more likely than their non-millennial colleagues to change jobs. Amy Adkins, "Millennials: The Job-Hopping Generation,"Gallup News, May 12, 2016.The 2016 Gallup study suggests that 21 percent of millennials switched jobs in 2015, which is three times greater than their non-millennial counterparts. Similarly, millennials are less complacent in their current places of employment. The Gallup study found that 60 percent of millennials are open to a different job opportunity, 15 percentage points higher than their non-millennial counterparts. On the whole, these data imply that the next generation of employees are trending toward less loyalty to their employers and more investment in their own individual careers.

In conjunction, these two factors spell bad news for employers: the increasing loss of customers with relationships with these transient employees. As employees become more transient and self-promoting, companies are increasingly at risk for losing business to their transient former employees. Employers usually try to protect themselves from losses by requiring new hires to sign agreements embedded with restrictive covenants, such as non-compete and non-solicitation clauses. However, these contractual protections face a heightened scrutiny by courts and have been recently regarded as inapplicable to passive social media interaction between former employees and restricted classes.

The Enforceability of Restrictive Covenants
State law governs the enforceability of restrictive covenants. States generally deviate from the typical contract law stance when analyzing their enforceability because of the public policy implications of these covenants. Ernest E. Badway et al., Fox Rothschild, LLP, National Survey on Restrictive Covenants (2016). However, this is not a new stance for the courts. Werlinger v. Mutual Serv. Cas. Ins. Co., 496 N.W.2d 26 (N.D. 1993) (citing W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 130, at 1012 (5th ed. 1984). Beginning in the Middle Ages and continuing through the 1600s, restrictive covenants were deemed illegal because of their restraint on trade. Id. (citing VIII W. Holdsworth, A History of English Law 56–59 (2d ed. 1937, 2d impression 1973). Then, after the 1600s, reasonableness exceptions in time and geography gained popularity. The courts realized that although restrictive covenants hindered trade, there were some circumstances where they protected legitimate business interests. These same exceptions for restrictive covenants are used today. Id. Although restrictive covenants are generally viewed unfavorably, a vast majority of states allow non-compete and non-solicitation agreements. Id.

Consequently, employer plaintiffs face a high bar when convincing courts that their restrictive covenants are enforceable. Moreover, when social media are factored into a particular case, plaintiffs need to clear an additional hurdle to convince courts that there has been a breach of their restrictive covenant with a former employee. Once it has been established that a restrictive covenant is enforceable, particularly a non-solicitation agreement, the determination of whether there has been a breach of contract hinges on how the court defines solicitation within the context of social media.

To understand how courts define solicitation in social media interactions, some explanation of the basic mechanics of the frequented social media platforms bears explanation.

Facebook. Facebook allows users to create their own webpage with whatever information they would like to share for public viewing. Users grow their network by adding "friends"; depending on privacy settings, this allows mutual access to content. Each user has a "wall" where he or she can post "status updates" and receive communications from other members. "Status updates" or communications allow others to comment or "like" the message as a way of interacting. All of these communications are accessible to other users' "newsfeeds" (live updates of users' networks). A user can then comment or like a communication from their newsfeed, just as on another user's wall.

LinkedIn. LinkedIn is dissimilar to Facebook—its primary purpose is to connect professionals. LinkedIn markets itself on its About page as the largest professional network on the Internet with over 500 million users spanning 200 countries and territories. Like Facebook users, LinkedIn users create an individual profile; however, LinkedIn profiles present similar to résumés. Profiles may contain past and current employment, professional accomplishments, professional interests, etc. Like Facebook profiles, LinkedIn profiles allow users to post status updates and allow other users to comment. These communications are available to whomever the user allows access (by using privacy settings). LinkedIn informs a user's network when the user updates his or her employment information by sending a message (either on LinkedIn or through email) soliciting congratulations from the user's network.

Twitter. Twitter is similar to Facebook and LinkedIn in that, to receive updates on another user, the users must be connected ("followed"). Users can "tweet" up to 140 characters per update and post them online. Other followers then have the ability to comment on the "tweet" and "retweet" (share) it to their own feed so that the tweet is available to their followers. Members who do not follow a user can nonetheless use the search function to find tweets.

Instagram. Instagram is an application used to share photos and videos. Like the other social media platforms discussed above, Instagram users have followers that may view a user's shared photos and videos. Photos and videos are shared to followers' feeds and allow followers to comment and "like" them.

Snapchat. Unlike the other platforms discussed, Snapchat's main purpose, is to create an outlet for private communication. Users who are connected may share photos or videos that disappear shortly after viewing. That being said, Snapchat allows users to post photos and videos to a "story" that the user's friends can view. However, a user's "story" is available for only 24 hours. After a user posts a photo or video to his or her story or sends a photo or video directly to a friend, the friend has the ability to send a message to the user commenting on the content.

The Courts' Responses and Implications on the Non-Solicitation Agreements
Despite the burgeoning use of these major social media platforms throughout the past 10 years, case law discussing alleged breaches of non-solicitation clauses through social media interaction is sparse. So the question remains: How do the courts define solicitation in this context? In the few cases involving this issue, courts continually draw a distinction between direct solicitation and mere passive social media use, which, according to jurisprudence, does not amount to solicitation.

For example, on a ruling for a preliminary injunction, a Massachusetts superior court judge ruled that the plaintiff could not establish success on the merits because the plaintiff could not prove the defendant solicited the plaintiff's clients. Invidia, LLC v. DiFonzo, 30 Mass. L. Rep. 390 (2012). In Invidia, the defendant's new employer posted a "public announcement" of the defendant's new employment on the defendant's Facebook wall. Id. at 14. On the public announcement, a former client of the plaintiff commented that she would "see [the defendant] tomorrow!" at her new place of employment. Id. The court held that to post a notice to the defendant's Facebook wall that the defendant would be working for the new employer did not constitute solicitation of the plaintiff's customers. The court went on to say that the situation would be a different matter if the defendant had contacted the former client directly to inform the client of the defendant's new place of employment. Id.

Courts have ruled similarly when it comes to communications via LinkedIn. In Enhanced Network Solutions Group, Inc. v. Hypersonic Technologies Corp., the defendants entered into a subcontractor agreement with plaintiffs and agreed to not solicit any clients for a period of one year. 951 N.E.2d 265, 267 (Ind. Ct. App. 2011). During the time of the restricted period of the agreement, the defendant posted a job opportunity on its LinkedIn page, available only to members who "belonged to a certain public group on LinkedIn." Id. As a result of the post, one of the plaintiff's employees informed the defendant that he was interested and inquired about the job posting. The plaintiff's employee then applied and started working for the defendant within the restricted period.

Because there was no definition of "solicit" in the agreement, the court used the Black's Law Dictionary definition of "solicit" to determine the ordinary meaning of the term. Enhanced Network Sols. Grp., 951 N.E.2d at 268. Black Law's Dictionary defines solicitation as "[t]he act or an instance of requesting or seeking to obtain something; a request or petition." Id. The court explained that based on this definition, the facts did not support the contention that the defendant solicited the employee to terminate his employment with the plaintiff and accept the job opening the defendant posted. Id.

In Pre-Paid Legal Services v. Cahill, the defendant signed a non-solicitation agreement that provided that the defendant could not solicit any employees to work for him after leaving the company. 924 F. Supp. 2d 1281, 1292 (E.D. Okla. 2013). After the defendant left, he repeatedly made posts to his public Facebook page "touting both the benefits of [new employer's] products and his professional satisfaction with [new employer]" while connected on Facebook with his former colleagues. The court ruled that because the facts of Pre-Paid were analogous to the facts in Invidia and Enhanced Network Solutions Group, the Facebook posts did not constitute solicitation. Id.

Although courts have continuously held that social media posts do not amount to direct solicitation, an argument can be made that repeated posts violate non-solicitation agreements through indirect solicitation. In an Ohio case, Arthur J. Gallagher & Co. v. Anthony, the plaintiffs argued that the defendant's post on Twitter and LinkedIn should be considered bulk advertising under Harris v. University Hospitals of Cleveland, and therefore indirect solicitation. Arthur J. Gallagher & Co.,No. 16-CV-00284, 2016 U.S. Dist. LEXIS 116384, at *41 (N.D. Ohio Aug. 30, 2016). In Harris, the court found indirect solicitation where the defendant placed advertisements in newspapers for over 2 months and sent out about 35,000 postcards to residents around specific office locations.Arthur J. Gallagher & Co., 2016 U.S. Dist. LEXIS 116384, at *41.The court in ArthurJ. Gallagher held that the facts were dissimilar because the defendant made one post on LinkedIn and Twitter. Id. The question of whether repeated posts on social media constitute indirect solicitation remains unanswered by case law. See Anderson, at 904.

Conclusion and Recommendations
Throughout the course of history, courts have recognized that restrictive covenants can serve a lawful purpose by protecting employers' legitimate business interests. But with the advent of social media, the balance has shifted against employers as employees move between companies at an increased rate. The effect of the recent litigation trend favor consumers and employees, while disfavoring employers.

Meanwhile, the entire discussion generates from what the parties agreed to when executing their employment agreements. As a safeguard, employers can hedge their losses with succinctly drafted agreements (focusing on artfully drafted non-solicitation clauses) to protect themselves from the impacts of solicitation through social media. Specifically, employers can protect themselves by succinctly defining solicitation in the agreement.

First, an agreement could contain the following:

As used herein, the term "soliciting" shall include, without limitation, publicizing, advertising, marketing, recommending, posting, "liking," "sharing," and similar activities on social media (including but not limited to Facebook, Instagram, and Twitter). . . .

H&R Block E. Enters. v. Gomez, No. 2:16-CV-14051-RSR, 2016 U.S. Dist. LEXIS 172197, at *10 (S.D. Fla. Dec. 9, 2016).

With such a proviso, a court will be able to analyze the facts within a clearly stated definition of solicitation. By way of example (and in the tradition of 20/20 hindsight), if this clause had been used in Enhanced Network, the court may have come to a different conclusion.

Second, an employer could protect itself through a "no contact" provision in their non-solicitation agreement that covers direct and indirect contact. The following is an example:

Employee will not directly or indirectly: . . . knowingly contact or solicit, either directly or indirectly, any person, firm or entity connected with [plaintiff], including its customers, clients, vendors, or suppliers for the purpose of diverting work or business from [plaintiff].

Saturn Wireless Consulting, LLC v. Aversa, No. 17-1637 (KM/JBC), 2017 U.S. Dist. LEXIS 65371, at *8 (D.N.J. Apr. 26, 2017).

The law regarding this area is in its infancy; in the meantime, the answer for employers' protection lies in creating neatly drafted contracts that cover solicitation in the social media context. Whether these protections are enforceable remains to be seen, but they could operate as viable deterrents to unwanted social media activity.

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