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Recruiter’s nonsolicit pact too broad, arbitrator says

A provision that barred a former employee from soliciting any customer the employee “had contact with, knowledge of, or access to” for 12 months after termination of employment invalidated an otherwise enforceable nonsolicitation agreement, an arbitrator has ruled.

The covenant became an issue after Tammy Rowe left her employment with Management Recruiters of the New River Valley, a franchise of Management Recruiters International, and opened her own business, T. Rowe Executive Search.

A substantial amount of the work of the new company was for a national company that she had served while she worked for Management Recruiters. She earned hundreds of thousands of dollars recruiting and placing retail managers with that company.

Rowe acknowledged during a deposition that she had violated the agreement by performing the services within a year and within 50 miles of the location of Management Recruiters’ office in Dublin.

But her attorneys, Dan Frith and Lauren Ellerman of Roanoke, contended the restriction on who Rowe could contact was much too expansive.

They cited as an example a database of 9,200 employers nationwide that Rowe had developed from information in the public domain. The restriction “purports to deprive Rowe from the opportunity to recruit for any of 9,200 employers located throughout the United States, regardless of whether MRNRV had conducted any business with them or had any expectancy of doing business with them,” said the arbitrator, Harrisonburg attorney M. Bruce Wallinger.

“This restriction is far broader than necessary to protect any legitimate business interest of MRNRV shown by the evidence and unduly restricted Rowe’s ability to earn a livelihood,” Wallinger said in In Re: Management Recruiters of the New River Valley and Tammy Rowe. (VLW 008-12-01).

He rejected Management Recruiter’s contention that a severability clause saved the covenants on time and distance.

“Virginia courts have declined to sever provisions of a contract which are related or interwoven,” and placing the provisions in sections and under different headings didn’t change their effect of restricting Rowe’s ability to engage in gainful employment, Wallinger wrote. “The purpose and effect of the provisions are so similar and related that they are inextricably intertwined and interdependent and cannot be severed without substantially changing the terms of the Agreement.”

Wallinger also found that the company had failed to adequately prove damages.

Gregory D. Habeeb, the Roanoke attorney who represented Management Recruiters, said, “We respect the arbitrator’s decision but we obviously disagree with this determination of Virginia law.”

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