Non-Solicitation Agreement: Everything You Need To Know

When it comes to employment contracts, some of the terms and conditions can be a bit tricky. Before you sign anything, take time to understand each element of the contract in question.

Non-solicitation agreements are an increasingly common part of the package employers want employees to sign. This article will cover what non-solicitation agreements are, when they’re signed, key terms to understand, and how they’re enforced. It will also talk about whether or not you should sign a non-solicitation agreement.

Key Takeaways

• Non-solicitation agreements prohibit you from asking your clients or coworkers to move to work with you after you leave your employer.

• Non-solicitation agreements are often signed when you’re first offered a job or when you’re about to leave the company.

• Non-solicitation agreements have to have something in them for you too.

• You can negotiate the terms of a non-solicitation agreement.

What Is a Non-Solicitation Agreement?

A non-solicitation agreement is a provision that prohibits an employee from soliciting clients or fellow employees after leaving a company.

To solicit means to ask for something – so the former employee cannot ask clients from her former company to become her clients at her new company or ask former coworkers to join her at her new company.ƒ

Non-solicitation agreements will cover one of two areas (or both):

1. Non-solicitation of clients

2. Non-solicitation of employees

The first case is easier to understand and define. Say you’re a salesperson for a company and you decide to take a job as a salesperson at a new company. If you signed a non-solicitation agreement, you are not allowed to bring your client list or information about price points with you to your new job.

This is less specific than a non-compete agreement because you can still work in the same field and take in-bound clients. You just can’t go out of your way to contact and ask former customers to switch to your new company.

As for former coworkers or employees, a non-solicitation agreement is a bit trickier to nail down.

Companies spend a lot of resources for training employees and want to protect this asset. A non-solicitation agreement that accounts for employees disallows a former employee from asking her former coworkers or subordinates to follow her to her new place of employment.

This is straightforward if you go out of your way to recruit former contacts at your old company, but it becomes a gray area when you advertise for a job opening, and a former contact from the old company applies for it.

Other Things to Know About Non-Solicitation Agreements

In addition to understanding what non-solicitation agreements require from you, you should also know that they generally aren’t standalone documents, that they’re a type of restrictive clause, and they have to have considerations for you too.

• They’re usually included in other contracts. A non-solicitation agreement can be a standalone document, but it’s typically part of a more extensive contract, such as an employment contract or separation agreement.

• They’re a type of restrictive clause. Along with non-disclosure, non-disparagement, and non-compete agreements, non-solicitation agreements make up what are known as restrictive clauses.

• There has to be something in it for you. Like all restrictive clauses, non-solicitation agreements must include what’s called consideration. In other words, the employer must give the employee something in return for signing it. If it’s part of your employment contract, then your consideration is the job itself.

  But suppose you’re signing a non-solicitation as part of a separation agreement. In that case, your consideration should be something else, like cash or the extension of benefits detailed in your severance package.

When Are Non-Solicitation Agreements Signed?

Non-solicitation agreements are usually signed at the beginning of your employment or as part of your separation agreement, but you may be asked to sign one somewhere in between.

A company may not force you to sign a non-solicitation agreement, but they can refuse to hire you or terminate you for failing to.

Non-solicitation agreements are most common for roles and industries that revolve around sales and services. They are also common at any time a customer pool is strictly limited.

For example, suppose your company makes a very specific part, and there are only a handful of potential clients in the area. In that case, a company has a much greater reason to require employees to sign a non-solicitation agreement.

On the flip side, businesses that create ubiquitous products where price points are everything also often require non-solicitation agreements.

In this circumstance, an employee with foreknowledge of pricing schedules has an extreme advantage when switching employers, which is exactly what non-solicitation agreements are designed to nullify.

Key Terms in Your Non-Solicitation Agreement

It’s crucial to understand the following language you may see in your non-solicitation agreement:

• Term. An essential part of any contract is the Term. Your non-solicitation agreement should spell out the duration that it applies.

  The longer the term, the longer period you are prevented from the solicitation. Courts typically look more favorably on employees when the agreement’s term is unreasonably long.

• Geographic area. Like non-compete agreements, non-solicitation agreements are usually restricted to a predefined area. Again, the more restrictive these terms are, the less likely a court is to enforce them.

• Types of restricted solicitation. Will the contract cover poaching customers, employees, or both? That’s up to your employer.

  The agreement should be very specific about what types of behaviors are restricted, or else a court is more likely to reject its validity.

• Covered employees. A reasonable company won’t disallow you from hiring or soliciting any and all of their still-current employees.

  A non-solicitation agreement should spell out which employees you are prohibited from soliciting. Clearly, poaching an entry-level employee won’t cause your former employer any undue stress, financially or otherwise.

• Consideration. When you sign a contract, both parties are supposed to get something out of it (otherwise, it’s just a gift). In the case of a non-solicitation agreement being part of your employment contract, your consideration is the job itself.

  However, if you’re being terminated, then you should receive some compensation for signing the non-solicitation agreement.

  The contract’s language should clearly spell out what your consideration is and that you are receiving “sufficiency of consideration” – a fancy term meaning what you’re getting is worth your while.

• A statement that you won’t violate the agreement. Kind of obvious, but the agreement should at some point state that you, the signer, won’t break the terms listed therein.

Enforcement of Non-Solicitation Agreements

Like other restrictive clauses, non-solicitation agreements are rarely black-and-white and, as such, are difficult to enforce. Courts usually fall on the employee’s side, seeing the right to work as an unofficial right of all Americans.

That is why non-solicitation agreements must be incredibly specific in their terms so that it’s easy to see when someone has broken the spirit or letter of the arrangement.

The state and even the jurisdiction you live in play a huge role in determining the validity and enforceability of your non-solicitation agreement. For example, California’s Supreme Court ruled that all non-solicitation agreements are unenforceable unless they protect trade secrets.

That’s why if you have any questions or feel uneasy about signing a non-solicitation agreement, you should contact local legal counsel for more tailored, specific advice.

Since non-solicitation agreements are generally more specific than non-compete agreements, they are more readily enforced by courts.

To be enforceable, non-solicitation agreements must abide by certain rules:

• Valid business reason. Protecting trade secrets, client lists, and employee-poaching are all considered legitimate reasons to have an employee sign a non-solicitation agreement.

  If your role has nothing to do with any of these things, then it’s unreasonable for a company to ask you to sign a non-solicitation agreement (and a court would be less likely to enforce it even if you did sign it).

• Proprietary interest. It’s one thing to say you can’t steal clients from a list that took a decade and countless resources to develop. It’s quite another to say you can’t use generally available knowledge that you happened to become privy to at your former role.

  In other words, if anyone, without any special knowledge, could generate the client list you’re not meant to “steal,” then it’s not really stealing.

• Voluntary action. Regardless of whether we’re talking about clients or employees, a non-solicitation agreement can’t compel outside parties to do (or not do) anything.

  If a client happens to switch from your old employer to your new one, you’re not automatically accountable for it.

  Likewise, your former coworkers can decide, of their own free will, to join you at your new company. The important point is that you’re not soliciting any of these changes.

• Right to work. The agreement can’t take away an employee’s right to earn a living.

  For example, suppose you live in a small community where all businesses in a particular industry are competing for the same clientele. In that case, a non-solicitation agreement might, on paper, prevent you from working for anyone other than your current employer.

  After all, you can’t avoid having knowledge of the limited customer pool, and you can’t just wipe your memory of price points and key players. In such cases, a non-solicitation agreement will be tricky to enforce.

• Indirect vs. direct solicitation. Non-solicitation agreements will usually include language on both indirect and direct solicitation. So far, we’ve been covering direct solicitation (asking someone, client or employee, to switch from your old employer to your new one).

  Things become less clear with indirect solicitation. Say you start a new business and advertise for open roles on LinkedIn. Many of your contacts are former coworkers and employees. Are you breaking the spirit of your non-solicitation agreement by allowing them to apply after seeing your ad?

  Or, say you post on Facebook that you’re working in sales for a new company, and a former client reaches out to you. Are you allowed to respond?

  These are very gray areas that will come down to where you live – contact a legal professional (which we, at Zippia, are not) to get answers to these tricky questions.

• Liquidated damages. This clause is becoming increasingly popular. Not only is enforcement time-consuming and expensive for employers to pursue, but it’s also hard to arrive at a definite figure for what damages the former employee must pay.

  You could use the amount of money that a particular client was bringing for a business or the cost of recruitment and training for an employee that was poached.

  Far simpler, though, is liquidated damages. This clause allows employers to set a figure that any signee in breach of contract will have to pay for each instance of solicitation.

  Companies may also try to “clawback” bonuses, stock options, or elements of your severance package if they find you in breach of contract. Understand the penalties before you sign anything.

Courts may throw out non-solicitation agreements for several reasons: The agreement’s language was too vague, it covered too long of a period, or is inapplicable to the current or former job description.

Additionally, courts can alter the terms of a non-solicitation agreement to make them lawful.

Should You Sign a Non-Solicitation Agreement?

Yes, you should sign a non-solicitation agreement, but only if the agreement is lawful and you’re comfortable with its terms.

If you’re at all concerned about the terms of the non-solicitation agreement, talk to a lawyer to see what they think.

You can also always negotiate the non-solicitation agreement with your employer and ask for more severance pay or a shorter restriction period.

Non-Solicitation Agreements FAQ

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

   You might be able to get around a non-solicitation agreement with the help of legal counsel. Non-solicitation agreements are legally binding documents, and unless there is an obvious flaw in the contract, you’ll be held to it.

   Obviously, not signing the agreement in the first place is the first way to get around this agreement, but if an employer is asking you to sign one, typically that’s going to have to happen, or you won’t be hired in the first place.

   Violating a non-solicitation agreement is not recommended as there are often serious fines imposed on people who do this, and it can harm your future employment options and professional reputation.

   The best way to get around a non-solicitation agreement is through legal counsel and open communication. If you’re looking to bring a couple of clients with you, there might be a couple of ways you can work out an agreement with your past employer to make this happen.

   Your legal counsel might also find some leeway with enforceability in your state, which can help you get around it. But again, your reputation is at stake, so the best approach is to be open and see if a mutual agreement can be penned.

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

   No, a non-solicitation agreement is not the same as a non-compete agreement. A non-compete tells the employee that they’re not allowed to work in that exact capacity after they leave the company, whereas a non-solicitation says you can’t “steal” customers or co-workers/subordinates from the company.

   In a non-compete agreement, you are barred from taking your knowledge and skill to a competitor. Usually, these agreements have a set length of time that they’re in effect after you’ve left the company. That term can be anywhere from months to years.

   It may also have a geographic clause. Some people simply cannot work in the same city or state, but in more proprietary instances, the ban’s reach could be more extensive.

   A non-solicitation agreement is a little more flexible. It allows you to stay in the same job and even work for the company next door doing the exact same thing, but it prevents you from taking your client list with you and “stealing” those customers.

   It might also prevent you from taking other employees with you to start up your own company or to join you at the competitor’s offices.

3. How do you prove solicitation?

   A company can prove solicitation by demonstrating that the exiting employee uses existing customers, employees, or trade secrets.

   It can be difficult to prove solicitation because a company’s clients are free to choose whom they do business with and if they want to follow the exiting employee, that’s not the employee’s fault, and it doesn’t mean they solicited their business.

   Think of a hairstylist who goes from Shop A to Shop B. That person’s clients probably hear it through the grapevine where the stylist is, and now they show up at Shop B to get their haircut the way they like it.

   That’s not solicitation, and the owner of Shop A would have a difficult, if not impossible, task of proving that it was solicitation. Likely, the customers would say they changed shops because of a personal choice or preference.

   But what if that stylist told every customer that they were going to Shop B and handed them a new business card with a discount coupon on it. If the owner of Shop A got their hands on that business card, they could easily prove that solicitation was happening.

   Even better, they found a loyal customer who was willing to testify that they had been told by the stylist to switch to Shop B, and they’d get a discount.

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

   No, you can’t get out of a signed non-solicitation agreement without another signed agreement and possibly legal assistance. A non-solicitation agreement is a legal document, and like any other legal document, it’s binding.

   That’s not to say that there isn’t any room for further agreements and revisions. Each situation is different, so it might pay to hire your own attorney to review the agreement and see if there are any loopholes in it, if you can remediate the situation through arbitration, or if the document is legally binding in your state.

   This is an interesting area of employment law, and there are often changes that could be more beneficial to the employee who signed a non-solicitation agreement.

   But it’s best to remember that it is a legal document, and signing it means you’re agreeing to what you’re signing. You should never sign any agreements without fully understanding what you’re agreeing to.

Final Thoughts

As the trend of employees leaving their company to start their own company continues, non-solicitation agreements are growing in popularity.

After all, companies have a legitimate reason to protect their interests and restrict former employees from poaching their top-talent or big-name clients.

While these agreements will always be written in challenging-to-read legalese, we hope this article has helped you understand the spirit of non-solicitation agreements.

As always, please check with a local employment attorney if you have more specific questions about non-solicitation agreements. This article is not meant to substitute legal advice and is only here for general information.

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.