Non-Solicitation Agreements Explained
This article is the second in our series explaining restrictive covenants in employment agreements. Read our first article on Non-Competes here, and read our third article on Non-Disclosures here.
Covenants to not solicit (or “Non-Solicitations” or “Non-Solicits” for short) are more limited than Non-Compete agreements. Non-Solicits only prohibit an ex-employee from soliciting his or her former employer’s clients or employees. Non-Solicits generally require (1) consideration, (2) the protection of a legitimate business interest, and (3) must be for a reasonable duration.
- Consideration
Like Non-Compete provisions and agreements, Non-Solicitations must have valid consideration. This means the employer must “give something” to the employee in exchange for the employee agreeing to the Non-Solicit. This consideration can be the employment itself. If it was signed after the employee was hired, typically continued employment can be sufficient consideration. However, the continued employment can be shorter (or non-existent) if the employee is given a bonus that the employee would not have otherwise received due to his or her employment in exchange for the Non-Solicit.
- Legitimate Business Interest
A Non-Solicit must be narrowly tailored to serve a legitimate business interest, which includes the retention of employees, the protection of clients, and the protection of confidential information.
However, Non-Solicits are typically not enforceable against a company’s employees when the company has a high turnover (because such a restriction is not needed to retain employees). A company may not be able to prevent an employee from soliciting another employee who works in a completely different department than the one in which the ex-employee worked.
Further, a company cannot prohibit an ex-employee from soliciting all of its clients. The clients must be either “near-permanent,” or the clients must have enjoyed an intimate relationship with the ex-employee. If the industry is highly competitive with little customer loyalty, or if the ex-employee did not work with a client, the Non-Solicit may not be enforceable.
- Reasonable Duration
Non-Solicits must be limited in duration meaning they are only as long as they need to be to protect the employer’s business. For example, a 5-year Non-Solicit would be unreasonable if a company does not retain its clients for more than a year.
Since Non-Solicits are limited to specific clients and employees, they ordinarily do not require a limited geographic scope. Still, such a limitation (or lack of limitation) could factor into the overall reasonableness of the Non-Solicit.
CONCLUSION
The enforceability of a Non-Solicit often requires case-by-case legal analysis. It is best to consult an attorney before drafting or signing such provisions.
Saper Law helps both businesses and employees negotiate restrictive covenants. Contact Saper Law at 312-527-4100 or book a consultation here.
