Common restrictive covenant language just failed in Delaware court. Your agreements might be next
A Delaware court struck down a bank's employee restrictions after half its division walked out, finding language many companies use in non-solicitation agreements fatally flawed.
The January 2, 2026 decision should prompt HR departments to pull out their restrictive covenant templates for a careful review. What happened to BankUnited could happen to any employer relying on similar protections.
The trouble started on a Friday afternoon in August when Brett Shulick, the executive leading BankUnited's National Title Solutions division, resigned at 4:30 p.m. along with three senior vice presidents. That evening, competitor Customers Bank called fifteen BankUnited employees offering new jobs, asking for answers by Sunday night. By the end of the weekend, eleven people had accepted.
BankUnited raced to court, arguing the departing employees violated non-solicitation agreements. The bank pointed to two documents: its employee Code of Conduct and stock award agreements the employees had signed when receiving equity compensation. Delaware's Court of Chancery examined both and found neither would hold up.
The Code of Conduct failed for a reason that applies to countless employee handbooks. The employees were at-will and got nothing extra for agreeing to the restrictions. Worse for BankUnited, the Code itself included a disclaimer saying it created no obligations or rights for employees. Vice Chancellor David relied on settled Delaware law: employee handbooks that don't establish fixed employment terms don't create binding contracts.
The stock award agreements presented a trickier question. The court agreed the agreements were probably valid but found the non-solicitation language inside them too broad to enforce.
The customer restrictions prohibited employees from contacting any BankUnited customer they had "received information" about during their last two years. BankUnited's position meant this covered every name on a daily report listing over 4,500 customer entries, or about 1,200 distinct customer groups. The court balked. No employer has a legitimate interest in preventing a single employee from soliciting thousands of businesses, including many that employee never dealt with.
The agreement also covered "prospective" customers and banned even "attempting to contact" customers, meaning an unanswered phone call could trigger a breach.
The employee restrictions had similar problems. The agreement prohibited "encouraging" any BankUnited employee to leave for "any other entity or person," not just competitors. Recent Delaware cases have found this kind of language unenforceable because it reaches beyond preventing unfair competition.
BankUnited asked the court to fix the agreements by crossing out the problematic parts, a process called blue penciling. The court refused. The employees accepted their stock awards through an online Merrill Lynch portal, clicking through screens to get their equity without negotiating terms. They didn't even know these restriction agreements existed until BankUnited sent cease-and-desist letters in late August.
The facts leading up to the departures show employees trying to follow the rules. When Shulick started discussing opportunities with Customers Bank, executives told him repeatedly to check for legal restrictions and not to bring confidential information. The four employees hired their own lawyer and sent him the Code of Conduct, employee handbook, and stock award documents they could find. None showed enforceable non-solicitation restrictions.
BankUnited claimed the employees stole confidential customer information, but the evidence didn't support it. When investigators checked the departing employees' phones, they found minimal saved customer contacts. Shulick had fewer than a dozen.
BankUnited filed suit on August 25, 2025, getting a temporary restraining order in late September. The court held a two-day hearing in mid-December with ten witnesses before denying BankUnited's request for a preliminary injunction and lifting the restraining order.
For HR professionals, the lessons are immediate. Review your restrictive covenants now. Look for language that prohibits "encouraging" employees to leave for any reason, not just to join competitors. Check whether your customer restrictions cover people the employee never contacted or only learned about through routine company communications. Remove provisions about "attempting" to do prohibited things.
Remember that employee handbooks alone won't create enforceable post-employment restrictions for at-will employees, especially if the handbook itself says it creates no contractual rights. If you need enforceable restrictions, put them in actual contracts with real consideration.
Don't count on courts to fix poorly drafted agreements. If your restrictions are too broad, expect them to fail entirely rather than be narrowed to something reasonable.
Finally, recognize that preventing mass departures requires more than legal documents. BankUnited's employees left because of frustration with technology, compensation, and leadership. Legal restrictions matter, but they work best as backup protection for a workplace people don't want to leave.
