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Non-Solicitation Agreement

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non-solicitation agreement is a contract that prevents an employee from persuading former clients and coworkers in joining them at a new company. It is commonly issued when onboarding new employees, although the contract can be signed at any point after employment begins as long as the necessary consideration is provided.

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Contents

What is a Non-Solicitation Agreement?

non-solicitation agreement is a restrictive agreement that, once signed, bars an employee from poaching a business’ personnel, contractors, customers, or clients after leaving the company. The agreement can be used as a standalone contract or can exist as a clause within a broader agreement, such as an NDA or non-compete.

When to Use

Many employers include non-solicitation clauses or standalone agreements in the onboarding process for every employee. While this type of “blanket” protection is technically permitted, many states require non-solicitation agreements to cover a specific business interest. Examples include specific types of employees prohibited from poaching, customer lists being off-limits, or another comparable reason.

The following are situations in which the agreement can be used:

  • To prevent the owner of a company from taking key employees after a sale or dissolution.
  • To prevent employees with access to confidential client lists from soliciting the clients post-employment.
  • To prevent an employee with a new business from poaching existing staff.
  • To retain employee-created patents, trade secrets, and other valuable data (must be established beforehand that all employee-created items are company-owned).

Non-Solicitation vs. Non-Compete

Both non-solicitation and non-compete agreements are employment contracts designed to restrict an employee’s ability to disrupt a business’s competitive advantage.

Of the two, non-compete agreements are considerably more restricting. The form prevents employees from working in a specific industry or with specific competitors following the end of employment. Non-competes will often specify the geographic area it affects (such as a city, state, or another territory) and the length of time the employee will be bound to it (e.g., 2 years).

Because non-compete agreements directly affect a person’s ability to work and make a living, they are considerably more difficult to enforce in a court of law. Whereas non-solicitation agreements are generally favored by the courts due to not interfering with where (or with whom) an employee works following their termination.

Importance of Consideration

In order to be enforceable, all contracts must have consideration. Consideration is anything of value provided in exchange for signing a contract. Nearly all state laws consider employment as valid consideration, as long as the form is signed at the time of hiring. Mid-term agreements, which are contracts signed by existing employees, could potentially involve additional consideration, which can come in the form of money, vacation days, or another type of reward or benefit.

Laws: By State

Note: Nearly all states require non-compete and non-solicitation agreements to be reasonable. This includes having an explicit purpose, avoiding overly broad terms, and containing limited scope and duration.

LEGEND:

  • – Permitted
  • X – NOT Permitted
  • ? – Unclear
  • EMPL? = If Employee Non-Solicitation agreements are permitted in the state
  • CUST? = If Customer Non-Solicitation agreements are permitted in the state
STATE EMPL? CUST? EXCEPTIONS / REQUIREMENTS STATUTES
AL § 8-1-190
AK Not applicable
AZ Not applicable
AR Not applicable
CA ? ? Non-solicitation agreements are generally prohibited; potential exceptions. Not applicable
CO ✓  X Must have reasonable time period and geographic scope
CT   Continued employment is not valid consideration (except for at-will employees)
DE  
FL  
GA   § 13-8-50
HI   Technology employees are exempt from non-solicitation & non-compete agreements. § 480-4
ID
IL
IN
IA
KS
KY
LA
ME
MD
MA
MI
MN
MS
MO
MT
NE
NV
NH
NJ
NM
NY
NC
ND X
OH
OK
OR
PA
RI
SC
SD   The term must be limited to two (2) years; certain health care providers are exempt. §§ 53-9-8 to 53-9-12
TN
TX   Non-solicitation falls under non-compete laws. § 15.50, § 15.51, & § 15.52
UT
VT
VI
WA
WV
WI
WY

Sample Non-Solicitation Clause

A non-solicitation clause can be added to an existing employment contract to prevent the need to sign two (2) separate agreements. The following is a sample clause that can be customized to the needs of the employer:


Related Forms

Non-solicitation agreements are often paired with the following forms:

Non-Compete Agreement – Prevents employees from competing with their employer following their departure, whether on their own or through employment with another business.

Download: PDF, Word (.docx), OpenDocument

 


Non-Disclosure Agreement – A contract that requires recipients of highly confidential information from disclosing what they learned with anyone not permitted.

Download: PDF, Word (.docx), OpenDocument

 


Frequently Asked Questions

What happens if a non-solicitation agreement is broken?

If a former employee breaches a valid non-solicitation agreement, the business can seek restitution in the following ways:

  • Injunctive Relief. This is a court order that stops the former employee from continuing to solicit customers or employees.
  • Damages. This can be a set sum of money or the amount of money that the employer lost due to the breach of the contract.
  • Attorneys’ Fees. The contract can stipulate that the losing party has to cover the cost of the other party’s attorneys’ fees.

Do non-solicitation agreements need to be notarized?

No. There is no statutory requirement in any of the 50 states that require non-solicitation agreements to be notarized. They only require the digital or handwritten signature of both the employer and employee.

When is a non-solicitation agreement enforceable?

Aside from any state-specific requirements, non-solicitation agreements are enforceable when they contain terms that only restrict what is absolutely necessary to protect the entity, and nothing more.

Additionally, non-solicitation agreements that prevent workers from earning an income will rarely be enforced. The following list includes a number of qualities that an enforceable non-solicitation agreement will have:

  • Mentions specific customers or employees that are off-limits.
  • Has a reasonable term (e.g., 1 year).
  • Contains fair geographical limits.
  • Binds an employee that has specialized skills (i.e., should not be issued to entry-level employees).
  • Does not restrict an employee that provides an essential service (e.g., health care professionals).

Can an employee be forced to sign a non-solicitation agreement?

No. No person or entity can force another person to sign a contract. However, if an entity requires all new hires to sign a non-solicitation prior to employment, the business can refuse to hire any employee that does not sign.