What Is a Non-Solicitation Agreement?
By Paris, published: 2023-11-02
Businesses must work hard to establish a clientele and invest much time, energy, and money into building and maintaining relations.
For business, relationships are an asset with great value in itself. Employers play a large part in building a rapport with clients by representing the company’s brand.
But what happens if an employee decides to walk away with the clients?
The significance of a non-solicitation agreement
A non-solicitation agreement is crucial for employers to prevent employees from misusing sensitive information.
For example, agencies often employ key staff members or managers to oversee client accounts and portfolios on their behalf, granting them access to confidential data.
By having them sign a non-solicitation agreement, the company can protect its valuable information, ensuring that employees do not exploit it for personal gain or to the advantage of competitors upon their departure.
Additionally, non-solicitation agreements help prevent employees from encouraging their colleagues to resign when they leave or pursue other opportunities. However, it is important to clearly define the duration of these restrictions within the agreement, as their impact only extends for a while.
When is a non-solicitation agreement used?
Nevertheless, it can also stand alone as an independent agreement. Its primary function is safeguarding a business’s interests, thwarting ex-employees from absconding with valuable company information, clientele, and workforce.
Take, for instance, a company wishing to secure its vendor list; it might opt for a distinct non-solicitation agreement or request new employees to agree to non-solicitation terms upon their onboarding.
Are Non-Solicitation and Non-Competes the same?
Non- Solicitation and Non-Compete Agreements are two different things. A non-solicitation agreement prevents the soliciting of clients or employees by former employers. There is usually a time and geographical limitation set on this.
On the other hand, a non-compete agreement prohibits a former employee from working at or starting their own business as a direct competitor with former employers.
Types of Non-Solicitation clauses
Non-solicitation of customers and non-solicitation of employees are two types of non-solicitation clauses, and depending upon the companies and the arrangement, either one or both could be required.
Non-Solicitation of customers
For businesses where employees work closely with clients, a non-solicitation of customer agreement is used to ensure that employees cannot take away the clients on their own or with them.
Non-Solicitation of employees
Companies invest a lot to train employees. When one employee moves on, there is a risk of them poaching away other employees, too.
A non-solicitation of employees’ agreement ensures that leaving employees cannot solicit or employ other company employees.
Direct vs. indirect solicitation
Direct solicitation is when a former employee directly targets the client or employee.
For instance, if the former employee calls to invite an ex-colleague or client to work with the new company they are associated with, this is a direct solicitation.
Indirect solicitation is slightly more tricky. This could be when a former employee pushes someone else from the new business to contact previous old clients or other employees.
It is often difficult to point out indirect solicitation if there is no breach of contract. However, if proven, it is a violation of the agreement.
A non-solicitation agreement or a non-solicitation clause restricts an employee from recruiting or contacting customers or other employees of a company after they have quit or left it.
The agreement is usually applicable for a certain time and geographical area only.