Non-solicitation agreements are contracts that prevent employees from soliciting the clients of the employer after the employee quits or is terminated. Courts have been suspicious of non-solicitation agreements and have placed a number of limitations on their enforceability. The best way to ensure the enforceability of a non-solicitation agreement is to understand the underlying legal background and to draft the agreement carefully and aggressively pursue former employees who violate it.
Define the term "non-solicitation" with particularity in the agreement. The definition should be worded so as not to prevent the employee from conducting normal social activities, even with company clients, or to prevent the employee from responding to offers initiated by company clients. Breach of the non-solicitation agreement should be limited to situations in which the employee proposes the commencement of a business relationship with company customers.
Exclude the employee's pre-existing contacts from the scope of the agreement. This includes anyone the employee has networked with before assuming employment with the company. Although this limits the scope of enforceability, it greatly increases the odds of enforcement.
Set a definite time limit on the enforceability of the non-solicitation agreement. Terms of two or three years after the employee leaves the company are usually enforced. The longer the term, the less likely the agreement will be enforced.
Separate the non-solicitation agreement and the main employment contract into two contracts that require separate signatures by the employee. The employee should be offered some benefit (in addition to employment) in exchange for signing the non-solicitation agreement in order to ensure that it is an enforceable contract. This ensures that if the main employment contract is ever ruled unenforceable, the non-solicitation agreement can be enforced independently.
Require new employees to post security bonds to secure their compliance with the non-solicitation agreement, to be released when the agreement expires. An alternative would be to offer a bonus to the employee, to be paid when the agreement expires.
File a lawsuit immediately if you find that a former employee has breached a non-solicitation agreement with your company. This may be enough to stop the solicitation, and is also likely to deter other current and former employees from soliciting company clients.
An employee cannot be fired for simply refusing to sign a confidentiality agreement that contains an unenforceable non-solicitation clause.
Tips and warnings
- An employee cannot be fired for simply refusing to sign a confidentiality agreement that contains an unenforceable non-solicitation clause.