Legal Guide

Non-Solicitation Agreements: What Entrepreneurs Should Know

When hiring employees or contractors you should consider whether they should sign a non-solicitation agreement. (You can also read about non-compete agreements here.)

These agreements can be used to prohibit someone from “stealing” your employees and contractors. They can also be used to prohibit someone from “stealing” your clients. Below is a deeper dive into each.

 

Non-Solicitation of Employees

Imagine this–you run a small marketing agency with five employees. One of them resigns and accepts a new job (or starts a new business). That employee then calls up one of your other employees and invites them to tag along. This could obviously cause you problems and it’s something you might be able to prevent by using a non-solicitation agreement.

In short, the agreement would say that an employee cannot solicit your other employees (and sometimes independent contractors) to leave your company for a set time period after they leave. The time period is usually between six months and a few years. It is smart to expand on the prohibited action to prohibit any intentional interference with your workers, as well as looping in “indirect” actions on behalf of another party.

(Note – sometimes we see exceptions to the prohibition, such as permission to hire your employee if they respond to a general employment advertisement not targeted at that specific employee.)

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Non-Solicitation of Clients

In a similar situation, imagine if that employee called your clients and convinced your clients to leave your agency for the employee’s new agency. This could be even worse than losing an employee because now you are losing revenue.

In much the same way as you can prohibit employees from soliciting your employees, you can also prohibit them from soliciting your clients. Keep in mind that this is different than a non-compete agreement. A non-compete broadly prohibits an employee from providing a competing service, while a non-solicitation is limited in scope. At a minimum, your non-solicitation should prohibit solicitations of your current clients, but it might also extend to prospects you were pitching when the employee left. You can also extend the restrictions to include intentional interference with your client relationships and also prohibit acting “indirectly” on another businesses behalf.

However, keep in mind that some states might require your non-solicitation of clients to only apply to clients with which the employee actually interacted, and not necessarily all of your clients. Of course, in that situation, it’s smart to also sign one or both of a non-compete agreement or a non-disclosure agreement.

 

Practical Tips

A non-solicitation agreement is kind of one part of a three-part process to protect your business. In addition to (or in place of) the non-solicitation, you should consider non-compete agreements and non-disclosure agreements. 

You can sign a stand-alone non-solicitation agreement, or the non-solicitation agreement can simply be placed into a larger agreement (like an employment agreement, or non-disclosure agreement, or something similar). The key is to make sure the agreement is obvious and signed by the employee.

(This article is general in nature and is not legal advice.)

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