Worker's goodwill negates agreements against competition
Published 10/07/05

Non-competition and non-solicitation agreements between an employer and a worker may not prevent workers from possibly accepting business from customers they serviced at their former employer.

In a recent decision in the Massachusetts Suffolk County Superior Court the Court found that the employer's good will was distinguishable from the good will the worker had obtained from the customers by providing superior service.

Particularly, in the case of Carl Getman and Cleary Schultz Insurance, LLC v. USI Holdings Corporation and Hastings-Tapley Insurance Agency the Court on September 1, 2005 ruled that Getman upon leaving his former employer USI Holdings Corporation could have notified his clients of his departure and told them where he was going and if they thereafter sought him out to do business with them he could accept their business notwithstanding the non-solicitation agreement that he had signed with his former employer.

In that case, Getman as an insurance agent had began working for Hastings-Tapley Insurance Agency in 1986. In 1989 he executed an agreement with Hastings-Tapley which included provisions barring him for a period of three years from competing with Hastings-Tapley and from soliciting clients or accepting business from its clients.

In 2003, USI Holdings Corporation purchased Hastings-Tapley and Getman became a USI insurance agent. He became unhappy working there and resigned on July 13, 2005 to work for a smaller agency, the plaintiff Cleary Schultz Insurance, LLC. Getman and Cleary filed an action in the Court seeking a finding that the agreement with Hastings did not lawfully restrict his right to compete with USI, to accept business from former clients, or to solicit former clients.

USI sought prior to trial an order against Getman prohibiting him from violating the non-solicitation agreement. The Court after reviewing the situation granted a preliminary order barring Getman from actively soliciting customers for one year instead of the three years in the agreement.

The Court noted the legitimate business interest of USI in this situation was one of good will. Good will is of great importance in the insurance brokerage business.

Customers have repeated and multiple insurance needs. Prompt service, integrity and loyalty are of some importance to customers who would tend to rely on key personnel who have demonstrated those qualities in the past. However, the good will that USI has is a legitimate business interest in is its own good will, not the good will earned by the worker that fairly belongs to the worker.

The Court noted that an objective, reasonable non-competition clause is to protect the employer's good will, not to appropriate the good will of the worker. The Court found that to strike a fair balance between protecting the good will earned as a company versus taking the good will belonging to Getman that Getman should not be barred from accepting insurance business from his former USI clients if without his solicitation of their business they wish to continue with his new insurance agency to service their insurance needs.

The restriction should be for one year in that within that year all renewals will have come due for those clients and they can without solicitation of Getman have an opportunity to make their own decision whether to stay with USI, seek out Getman, or go to another insurance agency. The Court specifically found it is not solicitation when an insurance agent prior to or immediately after his termination notifies his clients, as Getman did, that he is leaving his insurance company and joining another insurance agency and provides them with the new address, telephone number, or e-mail address.

The Court further found that if a former client initiates contact with the insurance agent it is not solicitation for the agent to explain in summary terms why he left his former employment and joined his current employer, without disparagement or a sales pitch as to his new agency, nor is it solicitation to describe in general terms the type of work that he will do in his new job and the nature of the work performed by his new company.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

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