Oklahoma recently passed a new law (Senate Bill 1031) that clarifies the enforceability of non-solicitation of employee covenants within the state. The new law attempts to resolve uncertainties that may have arisen about such restrictive covenants after the Oklahoma Supreme Court’s 2011 decision in Howard v. Nitro-Life Technologies, LLC.
In Howard, the Oklahoma Supreme Court found the restrictive covenants in an employee’s agreement with his former employer void and unenforceable as against Oklahoma’s public policy. Oklahoma is one of the three states that generally prohibit non-competition agreements. (California and North Dakota are the others).
Specifically, the court in Howard found the non-solicitation of employees covenant void and unenforceable because it also prohibited the hiring of individuals that might seek employment on their own initiative and absent any solicitation or inducement by past employees. Accordingly, the court held that the entire non-solicitation provision was void, which suggested that such anti-raiding provisions may not be enforceable under Oklahoma law.
While the U.S. Supreme Court ultimately vacated the decision in Howard because of the Oklahoma court’s failure to comply with the subject agreement’s arbitration provision, uncertainty remained regarding the enforceability of anti-raiding provisions under Oklahoma law.
The new law clarifies that non-solicitation of employee provisions are not unlawful restraints of trade:
“A contract or contractual provision which prohibits an employee or independent contractor of a person or business from soliciting, directly or indirectly, actively or inactively, the employees or independent contractors of that person or business to become employees or independent contractors of another person or business shall not be construed as a restraint from exercising a lawful profession, trade or business of any kind.”
It is significant that the text of the statute appears to permit only the non-solicitation of employees or independent contractors and not prohibitions on the hiring or employment of such individuals. This would be consistent with the Oklahoma Supreme Court’s analysis in Howard where it scrutinized a non-solicitation of employees provision that also prohibited the hiring of employees who may have never actually been solicited. Oklahoma’s new law appears to parallel California’s hostile non-compete laws, which allow the non-solicitation of employee covenants but generally prohibit no-hire or anti-employment provisions. (See Loral Corp. v. Moyes, 174 Cal. App. 3d 268 (1985)).
The new law goes into effect on November 1, 2013.