HI Supreme Court issues landmark noncompete, nonsolicitation decision

On February 17, 2022, Hawaii’s Supreme Court established guidelines for employers to follow to ensure enforceable noncompetition and nonsolicitation agreements. In the case, a real estate sales coach left her employer to form her own real estate brokerage firm, and her former employer sued to enforce her noncompete and nonsolicitation agreement. Hawaii’s Supreme Court upheld the trial court’s invalidation of the noncompete agreement because the employer couldn’t provide a legitimate purpose for the restriction. The state high court also held that a violation of a nonsolicitation clause requires active initiation of contact.

Nothing beats being the boss

In 2008, Lorna Gagnon moved from New Hampshire to Hawaii to work as a sales coach at Oahu-based real estate brokerage firm Prudential Locations. Before moving to Hawaii, she owned and operated a franchise of a large American international real estate company.

When Gagnon started her employment with Prudential, she signed a “confidentiality and noncompetition agreement.” The agreement’s noncompete provision generally prohibited her from performing any services that were similar to Prudential’s services in Hawaii for a period of one year after she left the company. Her agreement, however, permitted her to work independently or become an employee of an existing real estate brokerage company but prohibited her from starting her own real estate brokerage firm. It also contained a nonsolicitation clause, which prohibited her from soliciting Prudential employees or persons affiliated with the company.