This week, the federal government took aim at restrictive employment agreements it deemed unfair and unlawful when the Federal Trade Commission issued its final rule banning noncompetes nationwide. Meanwhile in Oklahoma, the state legislature spent its time this week moving in the opposite direction, expanding the scope of permissible non-solicitation agreements – another form of restrictive covenant – in an effort designed to protect companies’ legitimate business interests.

On Tuesday, the Oklahoma Legislature passed Senate Bill 1543 and sent it to the governor, where it currently awaits his signature. The bill broadens the scope of permissible non-solicitation prohibitions in an employment agreement.

As a refresher, Oklahoma law currently only allows an employment agreement to prohibit the “direct solicitation” of an “established customer.” Anything beyond those limited restrictions is unenforceable. For example, Oklahoma law does not allow noncompete agreements (i.e., an agreement prohibiting an employee going to work for a competitor), nor does it permit an agreement that prohibits “indirect solicitation” or solicitation of “prospective customers.” However, nothing in Senate Bill 1543 would now allow non-compete agreements under Oklahoma law. Conversely, Oklahoma law already allows companies to broadly prevent the solicitation of employees, as opposed to customers, and that is not changed by Senate Bill 1543.

Proposed changes

For many years, Oklahoma courts and companies have struggled with how to define the terms “direct solicitation” or “established customers.” That is all likely to change now. Under Senate Bill 1543:

• Employers will be permitted to prevent employees from soliciting customers “directly or indirectly, actively or inactively.” To minimize further debate over the term “established customer,” the word “established” will be stricken from the law
• Additionally, employers will be permitted to prevent employees from soliciting any “independent contractors.”

Senate Bill 1543 was passed by significant majorities in the Oklahoma House and Senate and is likely to be signed by Governor Stitt.

Should the law go into effect on November 1, 2024, as anticipated, employers should review their non-solicitation agreements. At minimum, they may be amended to prohibit indirect solicitation and still comply with Oklahoma law. While “customer” is not defined in Senate Bill 1543, it appears that employers are no longer limited to prohibiting solicitation of an “established” customer. Employers that want to protect their legitimate business interests and stop unfair competition should work with counsel to navigate the quickly changing landscape of restrictive covenants on both the state and federal level.