Does refering a potential client to a former client of mine, absolve me of a non-compete with my former client?
<p>My LLC is under a non-compete with a former client in one state that basically says not to provide any IT consulting or hosting that may be considered competition to what they do (lets call them &quot;Acme Corp&quot;). So if a potential client in that same state approaches me and I refer them in writing to my former client, Acme Corp, with whom my LLC has the non-compete, and my potential client responds in writing they dont want service from Acme Corp. Is it still competing at that point if I then take them on as a client?</p>
<p>Section:</p>
<blockquote>
<p>During the term of this Agreement and for a period expiring two (2) years after the termination of this Agreement for any reason, Contractor covenants and agrees that Contractor will not:</p>
<p>a. Hire, offer to hire, entice away or in any other manner persuade or attempt to persuade any officer, employee or agent of [Acme Corp] or any of its affiliates
to alter or discontinue a relationship with [Acme Corp] or to do any act that is
inconsistent with the interests of [Acme Corp] or its affiliates;</p>
<p>b. Directly or indirectly solicit, have contact for purposes of selling any
products and/or services to (except on behalf of [Acme Corp]), divert, or take
away any customers of [Acme Corp] or any of its affiliates; or</p>
<p>c. Directly or indirectly solicit, divert, or in any other manner persuade or
attempt to persuade any supplier of [Acme Corp] or any of its affiliates to alter
or discontinue its relationship with [Acme Corp] or any of its affiliates.</p>
<p>d. For the purposes of this Section 4, businesses that are deemed to
compete with [Acme Corp] include, without limitation, businesses engaged in IT
system sales, integration, consulting, application development,
maintenance and hosting. Competition also includes any additional goods
or services that [Acme Corp] provides its customer(s), including goods and
services that [Acme Corp] offers or prepares to offer in the future while
Contractor is employed with [Acme Corp]. Notwithstanding Contractor's
obligations under this Section 7, Contractor will be entitled to own, as a
passive investor, up to five percent (5%) of any publicly traded company
without violating this provision.</p>
<p>e. [Acme Corp] and Contractor agree that: this provision does not impose an undue
hardship on Contractor and is not injurious to the public; that this provision
is necessary to protect the business of [Acme Corp] and its affiliates, including
their trade secrets; the nature of Contractor's responsibilities with [Acme Corp]
under this Agreement require Contractor to have access to and develop
confidential information which is valuable and confidential to all of the
Business; the scope of this Section 7 is reasonable in terms of length of
time and geographic scope; and adequate consideration supports this
Section 7, including consideration herein.</p>
</blockquote>
<p>.. where <code>[Acme Corp]</code> is a <a href="https://en.wikipedia.org/wiki/Acme_Corporation" rel="nofollow noreferrer">fictional entity</a></p>
<hr />
<p><strong>UPDATE</strong>: Based on interaction with Ross Ridge below, let me clarify:</p>
<ol>
<li><p>my new client never intended to use Acme corp in the first place</p>
</li>
<li><p>therefore Acme Corp did not lose out on the possibility of servicing this client because this client wants nothing to do with Acme corp in the first place</p>
</li>
<li><p>I have obtained all this info in my agreement with the new client</p>
</li>
</ol>

<p>Of course it is still competing.</p>

<p>The customers'preference is not relevant, as any customer that you service is prefering to deal with you rather than with your former employer. If they had prefered getting the service from your previous employer, they would have tried getting a contract with your previous employer.</p>

<p>The argument that "because the customer prefers me I am no longer bound by the non-compete" would make any non-compete clause pointless.</p>

<p>What is relevant is that you have the obligation (within the contents of the clause, and as long as it is legally enforceable) not to provide those services.</p>

<p>That obligation is from you to your former employer, a third party (the customer) generally cannot waive it, and neither can you "absolve yourself" (unless the contract allows for a way to do it), the same way that your customer cannot "absolve itself" from paying you the amount agreed in a contract unless there is some kind of stipulation allowing for it in the contract.</p>

<p>The non-compete clause encompasses entities which have been customers (perhaps including <em>prospective</em> ones, although that is debatable) of Acme at any point during your relation with Acme. If the potential client (henceforth "PC") was not Acme's customer during your relation with Acme, then the clause does not apply because the company cannot reasonably argue that you took away its customer. It is unclear from your post whether PC has had a business relation with Acme at all.</p>

<p>If the clause is applicable, then your only option is that you or PC ask Acme to waive the clause as to PC. Since PC decidedly is discarding Acme this time, he seemingly has stronger leverage than you to persuade Acme on the waiver. After all, Acme's intransigence would only reinforce PC's refusal to assign to Acme any other business in the future.</p>

<p>Absent a prior relation between PC and Acme, your approach of first referring PC to Acme is needlessly risky and <em>could</em> backfire since the prospect of PC's business would be brought within scope of the clause. The scenario that you voluntarily make the referral --prior to servicing the PC-- still affords to Acme the plausible allegation that you prompted Acme to incur losses (in the form of resources Acme spent in trying to "close the sale" with PC) despite your knowledge beforehand that PC would retain you.</p>

<p>I know this was a couple of years ago, and this is jurisdiction dependent, the non-compete clause could be invalidated because the term is an unreasonable amount of time or an unreasonable restriction based on the services or service lifecycle provided by your respective companies.</p>
<p>For instance if the time of receiving work to completion of a job is 3 months then the 2 year exclusion would be an unreasonable time to prevent you from plying your trade. As @Iñaki mentions the non-compete is primarily intended to preventing you from soliciting existing or in the pipeline customers away from the company you have the non-compete with not a prevention from doing your own legwork and generating your own customer pool.</p>

non-compete