No-Soliciting Provisions in a LinkedIn World

[Updated 7:30 a.m. EDT, July 6, 2011: I added the proposed contract language at the end.]

I’ve come to value Venkat Balasubramani’s posts on Eric Goldman’s Technology & Marketing Law Blog. They’re a useful source of leads regarding novel contract-drafting issues.

A case in point: this post by Venkat regarding the recent opinion of the Indiana Court of Appeals in Enhanced Network Solutions Group v. Hypersonic Technologies Corp., 2011 WL 2582870 (Ind. Ct. App. June 30, 2011). (Go here for a PDF copy of the opinion.)

I’ll let you consult Venkat’s post for the details, but here’s the gist of it: Hypersonic posted on a LinkedIn group a notice about a job opening at Hypersonic. An employee of Enhanced saw that notice and contacted Hypersonic to express his interest, and that led to Hypersonic’s hiring him. That in turn caused Enhanced to claim that by posting that notice, Hypersonic had breached the no-soliciting provision in a contract between Hypersonic and Enhanced.

The court held that Hypersonic had not breached the no-soliciting provision. Instead, after consulting Black’s Law Dictionary it held that because the Enhanced employee had contacted Hypersonic after reading the job posting, the employee had solicited Hypersonic, not vice versa.

The court would have done well to get its head out of the dictionary—I think most native English speakers wouldn’t say that if I respond to a company’s help-wanted ad, I’m soliciting that company.

But that quibble has no bearing on the court’s holding. A bigger issue is the one that Venkat alludes to in his post: Doesn’t the nature of LinkedIn groups make responding to a notice on a LinkedIn group different from responding to a help-wanted notice in a newspaper? The court didn’t address this issue. Is it something that a contract party might want to address in a no-soliciting provision?

If Acme is subject to a no-soliciting provision (as opposed to a no-hiring provision) in a contract with Widgetco, caselaw suggests that courts would likely hold that Acme wouldn’t be in breach of that provision if it were to hire a Widgetco employee who had responded to a help-wanted notice that Acme had placed in a newspaper.

If that’s what the parties have in mind, it would be best to make it explicit in a contract. Here’s the relevant provision from Koncision’s confidentiality-agreement template:

This section X does not prohibit Acme from hiring any individual who responds to an advertisement or announcement that is not directed specifically at employees of Widgetco or any individual recruited by a recruitment firm that did not specifically target employees of Widgetco.

Two factors underlie this exemption: First, it applies to help-wanted notices that don’t target employees of a specific company. And second, given the initiative involved in scanning a newspaper for employment opportunities, it would seem unfair to consider that by hiring a Widgetco employee who responds to a help-wanted notice, Acme is poaching Widgetco employees.

But when a company advertises a job opening on a LinkedIn group, that differs from the newspaper-ad scenario in two important respects: First, by joining Acme’s LinkedIn group, Widgetco employees would ensure that they are notified directly of any job vacancies—no scanning of the help-wanted ads would be necessary. And second, Acme would know the identity of all group members, including any Widgetco employees.

The increased efficiency and transparency of LinkedIn job postings makes them something of a hybrid. They require initiative on the part of members—after all, you have to join the group. But thereafter, it’s as if Acme is soliciting the members, albeit not only those who are Widgetco employees.

And that efficiency and transparency would make it easier to circumvent a no-soliciting provision—all that would be required is for a significant number of Widgetco employees to join Acme’s LinkedIn group.

So even if Widgetco were willing to allow Acme to hire a Widgetco employee who responds to a newspaper ad, it might be wary of Acme’s using its LinkedIn group to hire Widgetco employees.

What could Widgetco do? It could carve out LinkedIn-type groups from the general-advertisement exception in its contract with Acme, but that doesn’t seem promising: Job postings have largely moved online and increasingly feature the efficiency and transparency that characterize LinkedIn groups. As a result, excluding LinkedIn-type groups from the exception would in effect go a long way towards turning a no-soliciting provision into a no-hiring provision.

It might be simplest to take that step explicitly, but no-hire provisions are subject to stricter court scrutiny.

So I have no easy answers as to which position to take. But if you want to avoid following Enhanced and Hypersonic into court, you should consider making explicit your position, whatever it is. Here’s a sentence you could tack on to the provision quoted above:

For purposes of this section X, an announcement that Acme makes on any LinkedIn group (or comparable online network) that includes Widgetco employees will constitute an announcement that is [not] directed specifically at employees of Widgetco.