A 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.
- Prevents a person from “stealing” customers or employees away from a company.
- Can exist as a standalone contract or as a clause within a larger form.
- Common in sales and executive teams.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
A 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.
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).
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.
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.
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.
- ✓ – 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|
|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)|
|HI||✓||Technology employees are exempt from non-solicitation & non-compete agreements.||§ 480-4|
|SD||✓||The term must be limited to two (2) years; certain health care providers are exempt.||§§ 53-9-8 to 53-9-12|
|TX||✓||Non-solicitation falls under non-compete laws.||§ 15.50, § 15.51, & § 15.52|
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:
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.
Non-Disclosure Agreement – A contract that requires recipients of highly confidential information from disclosing what they learned with anyone not permitted.