Non-Solicitation Agreement: Everything You Need To Know

Understanding employment contracts can be complex, particularly with terms and conditions that may be difficult to navigate. Before signing any agreement, it’s crucial to grasp every aspect of the contract.

Non-solicitation agreements have become standard components in employment packages in recent years. This article outlines what non-solicitation agreements entail, when they are typically signed, essential terms to be aware of, and how they are enforced. We’ll also discuss whether signing a non-solicitation agreement is advisable.

Key Takeaways

• Non-solicitation agreements prevent you from encouraging your clients or coworkers to leave your current employer to join you at a new position.

• These agreements are commonly signed at the start of employment or upon exiting a company.

• Non-solicitation agreements should offer mutual benefits to both parties involved.

• It is possible to negotiate the terms of a non-solicitation agreement.

What Is a Non-Solicitation Agreement?

A non-solicitation agreement is a contractual provision that restricts an employee from soliciting clients or co-workers after leaving a company.

To solicit means to request something, so a former employee cannot invite clients from their previous employer to become clients at their new company or encourage former co-workers to join them.

Non-solicitation agreements generally cover two main areas:

1. Non-solicitation of clients

2. Non-solicitation of employees

The first aspect, non-solicitation of clients, is relatively straightforward. For instance, if you’re a salesperson who transitions to a new company, a non-solicitation agreement would prevent you from bringing your client list or sensitive pricing information to your new employer.

Unlike non-compete agreements, which restrict you from working in the same field entirely, non-solicitation agreements allow you to remain in the industry and accept inbound clients. However, outreach to former clients to entice them to switch to your new company is prohibited.

Non-solicitation of employees is more complex. Organizations invest significantly in training their workforce and want to safeguard this investment. A non-solicitation agreement regarding employees prohibits former employees from recruiting co-workers to follow them to a new job. While actively recruiting former colleagues is clear-cut, it becomes murky when a former co-worker applies for an advertised position at your new company.

Other Important Considerations Regarding Non-Solicitation Agreements

Understanding the requirements of non-solicitation agreements is vital, along with knowing that they are typically not standalone documents. They are a form of restrictive covenant and must also provide some benefit to you.

• Typically part of larger contracts. While a non-solicitation agreement can stand alone, it is often embedded within broader contracts, such as employment or separation agreements.

• A type of restrictive clause. Non-solicitation agreements fall under restrictive clauses alongside non-disclosure, non-disparagement, and non-compete agreements.

• Mutual benefits are necessary. Like all restrictive clauses, non-solicitation agreements must provide what is known as consideration, meaning the employer must offer something in exchange for your signature. If included in your employment contract, your consideration is the job itself. However, if you are signing a non-solicitation as part of a separation agreement, your consideration might be severance pay or an extension of benefits.

When Are Non-Solicitation Agreements Signed?

Non-solicitation agreements are typically signed at the beginning of employment or during a separation agreement. However, you could be required to sign one at various points throughout your employment.

While companies cannot mandate that you sign a non-solicitation agreement, they may refuse to hire you or terminate your employment if you refuse to sign.

Non-solicitation agreements are prevalent in sales-driven industries and organizations with limited customer pools. For example, if a company manufactures a niche product with few potential clients, there is a strong incentive for them to require employees to sign non-solicitation agreements.

Conversely, companies producing widely available products may also implement non-solicitation agreements to prevent employees from leveraging insider knowledge of pricing strategies when switching employers.

Key Terms in Your Non-Solicitation Agreement

It’s important to familiarize yourself with the following terms that may appear in your non-solicitation agreement:

• Term. The duration of the agreement is a vital detail. The longer the term, the more extended the restriction on solicitation. Courts generally view excessively long terms unfavorably towards employers.

• Geographic area. Similar to non-compete agreements, non-solicitation agreements often specify a geographic scope. More restrictive terms are less likely to be enforced by courts.

• Types of restricted solicitation. The agreement should clarify whether it covers poaching clients, employees, or both. Specificity is crucial for enforceability.

• Covered employees. A reasonable company won’t prohibit you from recruiting all of their current employees. The agreement should specify which employees are off-limits for solicitation.

• Consideration. When signing a contract, both parties must gain something. If the agreement is part of your employment contract, the job itself serves as your consideration. If you’re being terminated and asked to sign a non-solicitation agreement, you should receive compensation in return.

• Compliance statement. The agreement should state that you, the signer, agree to abide by its terms.

Enforcement of Non-Solicitation Agreements

Non-solicitation agreements, like other restrictive clauses, can be complex and challenging to enforce. Courts often favor employees, recognizing the right to work as a fundamental principle.

Thus, non-solicitation agreements must delineate specific terms to clarify when a breach has occurred. The enforceability and validity of an agreement can also depend on your state and local laws. For instance, California courts have ruled that non-solicitation agreements are unenforceable unless they protect trade secrets.

If you have concerns or questions about a non-solicitation agreement, consulting with local legal counsel for personalized advice is advisable.

Generally, non-solicitation agreements are easier for courts to enforce than non-compete agreements, provided they adhere to specific stipulations:

• Legitimate business interest. Valid reasons for requiring a non-solicitation agreement include protection of trade secrets and client lists. If your role does not relate to these areas, a court is less likely to uphold the agreement.

• Proprietary interest. An employer must demonstrate that the information being protected is proprietary. If the knowledge is widely available, the agreement may not hold up in court.

• Voluntary action. Non-solicitation agreements cannot compel third parties to act in any specific manner. If clients or employees choose to transition to your new role independently, you are not liable.

• Right to work. The agreement cannot infringe on an employee’s ability to earn a living. In small markets with limited competition, enforcement may be problematic.

• Indirect vs. direct solicitation. Non-solicitation agreements often address both forms of solicitation. Clarification on what constitutes solicitation is essential to avoid potential disputes.

• Liquidated damages. This clause is becoming more common, allowing employers to establish a fixed penalty for breaches, simplifying the enforcement process.

Courts may invalidate non-solicitation agreements for several reasons, including vague language or excessive duration. They can also modify terms to ensure legality.

Should You Sign a Non-Solicitation Agreement?

Signing a non-solicitation agreement is advisable if the terms are lawful and agreeable to you. If you have reservations about any clauses, consult a lawyer for professional insight.

Additionally, feel free to negotiate the terms of the agreement, such as requesting more severance pay or a shorter restriction period.

Non-Solicitation Agreements FAQ

1. How do I get around a non-solicitation agreement?

   Consulting legal counsel is the best way to navigate a non-solicitation agreement. These agreements are legally binding, so unless there is a clear flaw, you will be held to its terms.

   The first way to avoid a non-solicitation agreement is to not sign it initially. However, if an employer requires it, signing is typically necessary for employment.

   Violating a non-solicitation agreement can result in severe penalties and damage your professional reputation. The best route is to engage in open communication with your previous employer, possibly negotiating a mutual agreement.

2. Is non-solicitation the same as non-compete?

   No, a non-solicitation agreement differs from a non-compete agreement. Non-compete agreements restrict employees from working in the same capacity after leaving, while non-solicitation agreements prevent the “stealing” of clients or co-workers.

   A non-compete can have time limits ranging from months to years and often includes geographic restrictions, while non-solicitation agreements allow you to work within the industry but prohibit you from taking your client list with you.

3. How do you prove solicitation?

   Proving solicitation involves demonstrating that an employee utilized existing clients, employees, or trade secrets. It can be challenging as clients have the right to choose their service providers.

   For instance, if a hairstylist transitions from one salon to another, and clients follow them, it’s not solicitation unless the stylist actively encourages them to switch.

4. Can you get out of a non-solicitation agreement?

   No, a signed non-solicitation agreement is legally binding. However, you may negotiate further agreements or revisions. Hiring a lawyer to review the document for potential loopholes or arbitration opportunities can be beneficial.

Final Thoughts

As employees increasingly leave their jobs to establish their own businesses, non-solicitation agreements are becoming more prevalent.

Companies have valid interests in protecting their client relationships and preventing former employees from recruiting their top talent.

While these agreements are often laden with complex legal jargon, this article aims to clarify the essence of non-solicitation agreements.

For specific inquiries regarding non-solicitation agreements, always consult with a local employment attorney, as this article serves only as a general guideline and is not a substitute for legal advice.

Author

Matthew Zane

Matthew Zane is the lead editor of Zippia's How To Get A Job Guides. He is a teacher, writer, and world-traveler that wants to help people at every stage of the career life cycle. He completed his masters in American Literature from Trinity College Dublin and BA in English from the University of Connecticut.