All You Need To Know About Non-Solicitation Agreement

A non-solicitation agreement (or clause) is a contract (or its part) wherein an employee agrees not to solicit a company’s clients or customers, for his or her own benefit or for the benefit of a competitor, after leaving the company. Simply put, you can't use your old company contacts to help your new business. A non-solicitation agreement is one of numerous provisions that often appear in employment agreements. They can also show up as unique contracts. Others include non-compete or non-disclosure agreements, and the three jointly are sometimes called the restrictive covenants.

When a non-solicitation Agreement Is Used?

Non-solicitation agreements are especially common in business areas of sales and provision services, particularly when the customer pool is limited. These agreements are found to secure important employees and customer relationships. Companies also try to prevent indirect and passive solicitation, which means a former employee who starts a business can't promote himself. Implementation of this demand might be unlawful, since it won’t allow a company to let anyone know of its existence.

What Makes a non-solicitation Agreement Enforceable?

Sometimes, it might be impossible to enforce a non-solicitation agreement even if an employee did sign it. For example, the California Supreme Court has ruled that non-solicitation agreements that prohibit employees from soliciting their former employer’s customers are void – unenforceable – as a matter of the state’s public policy. However, outside of California, non-solicitation agreements are likely to be enforced as long as they don’t make it too difficult for an employee to earn a living or unfairly limit a competitor’s ability to hire workers or attract customers through legitimate means.

To be enforceable, an agreement must meet these requirements:

• The agreement shall not stop employees or customers from leaving the company.

• If the agreement is about customers, the customer list has to be valuable and contain confidential information.

• The employer must have a valid business reason.

• Non-solicitation agreements can’t prevent a client, customer, or employee from moving to a competitor voluntarily.