March 20, 2024
Mark Fahleson
Rembolt Ludtke Employment & Labor Law Practice Group
On March 18, 2024, the U.S. District Court for the District of Nebraska issued a timely reminder of what Nebraska law allows—and doesn’t allow—when it comes to employee noncompetition and nonsolicitation agreements. Sisk v. Scripps Media, Inc., 2024 WL 1175140 (D. Neb. 2024).
Stephen Sisk (“Sisk”) was employed by Scripps Media (“Scripps”) working as sales director at an Omaha television station. In the fall of 2023 Scripps eliminated Sisk’s position and gave Sisk the option to leave the organization with severance or accept a demotion to local sales manager. Sisk accepted the demotion and was required to sign a Sales Compensation Plan that contained the following non-competition and non-solicitation provisions:
4. Non-Solicitation.
(a) Customer Non-Solicitation. Participant agrees that during employment and for a period of one (1) year after termination of Participant’s employment with the Company, regardless of reason, Participant will not: (i) solicit, attempt to solicit, call on, or accept business from any customer of the Company at Participant’s assigned station(s); or (ii) interfere with, disturb or interrupt the relationships (regardless of whether such relationships have been reduced to formal contracts of the Company at Participant’s assigned stations(s) or any of its parent, subsidiary, or affiliated companies with any customer, user, advertiser, supplier or consultant. The non-solicitation obligation in this paragraph is limited to those customers, users, advertisers, suppliers or consultants with whom Participant had personal contact during his or her employment and whom the Company at Participant’s assigned station, had an actual or prospective relationship within the (6) months preceding the termination of the Participant’s employment. This paragraph does not pertain to lawful solicitation of customers through general marketing, and
5. Non-Competition.
(a) In General. Participant is being employed in an important fiduciary capacity with the Company and the Company is engaged in a highly competitive business. Participant and the Company agree that it is appropriate to place reasonable limits on Participant’s ability to unfairly compete with the Company to protect and preserve the legitimate business interest and good of the Company.
(b) Restrictions. Participant agrees that during employment with the Company and for a period of six (6) months after termination of Participant’s employment regardless of reason, Participant will not directly or indirectly in a capacity where Participant could use specialized knowledge, training, skill or expertise, Confidential Information, or customer contacts obtained from the Company to the detriment of the Company), engage in any of the same or substantially similar activities, duties, responsibilities or services, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, Participant, partner, principal, member, agent, representative, or consultant to any person, entity, business or activity that is “Competitive with the Company” in the “Restricted Area” as those terms are defined below. . . . After the end of the term of Participant’s employment with the Company, the non-compete restriction in this Section 5 shall restrict Participant’s conduct within the territory or territories in which Participant provided services or acted on behalf of the Company during the one (1) year period immediately preceding Participant’s termination (“Restricted Area”). It is intended as of the date of this Agreement that the Restricted Area will be the designated market areas for the station(s) to which Participant is assigned.
(c) Competitive with the Company Defined. For the purpose of this section 5, a person, entity, business or activity is considered “Competitive with the Company” if it offers or produces products or services that are substantially similar to those being produced or provided by the Company, or if it offers or produces products or services that are otherwise directly competitive with or substitutable for the Company’s products and services. Such businesses include, but are not limited to, local or reginal television, radio, newspaper, directory, or pureplay digital businesses.
Scripps terminated Sisk’s employment on February 2, 2024. Sisk asked Scripps to release him from the non-competition and non-solicit restrictions as he was interested in working for another television station in Omaha. In response, Scripps said it would not release him and would enforce the agreement against Sisk.
Sisk filed suit against Scripps asking the court to declare the non-solicit and non-competition provisions to be unenforceable and to enjoin Scripps from attempting to enforce them.
In granting Sisk’s motion for an injunction, the court held that both the non-competition and non-solicitation provisions were unenforceable under Nebraska law.
First, the non-competition clause is unenforceable under Nebraska law because it was overly broad in that it prevented Sisk from accepting employment with any entity that “offers or produces products or services that are substantially similar to those being produced or provided by "Scripps, which the court concluded would include such things as social media and streaming television.
The court also found the non-solicitation clause to be unenforceable because the clause is not limited to restricting Sisk from soliciting Scripps’s clients or accounts with whom he actually did business and had personal contact. The court noted that the language not only restricts Sisk from soliciting customers with whom he had personal contact but with whom Scripps "had an actual or prospective relationship.” Because this provision greatly exceeds the permissible scope of customers an employee may be precluded from contacting by a restrictive covenant, it too is unenforceable under Nebraska law.
Nebraska law is not kind to noncompetes and they are generally unenforceable in the employee context. By contrast, Nebraska courts will uphold employee nonsolicitation agreements if properly and narrowly drafted.
In Nebraska, a nonsolicitation agreement is enforceable only if it restricts the former employee from working for or soliciting the former employer's clients or accounts with whom the former employee “actually did business and had personal contact” while employed by the former employer. Employers wishing to use nonsolicits are encouraged to use these “magic words” (i.e., “actually did business and had personal contact” with) in their agreements since Nebraska courts have consistently upheld this language.
Employers should also be mindful that several federal agencies, including the Federal Trade Commission and National Labor Relations Board, are contemplating regulatory and legal action to invalidate most employee noncompetition and nonsolicitation agreements across the country. We’ll keep you apprised as those regulatory matters develop.
The Rembolt Ludtke Employment & Labor Law Practice Group is available to assist employers with agreements to protect employer good will and trade secrets, as well as other legal matters that arise in the workplace.
This article is provided for general information purposes only and should not be construed as legal advice. Those requiring legal advice are encouraged to consult with their attorney.
