Covenant not to solicit: Overview, definition, and example
What is a covenant not to solicit?
A covenant not to solicit is a contractual provision that prohibits one party from actively recruiting or doing business with another party’s employees, customers, or clients for a specific period after a business relationship ends. This restriction is commonly used in employment contracts, partnership agreements, and business sales to protect against unfair competition and client poaching.
For example, if a senior salesperson leaves a company, a covenant not to solicit may prevent them from reaching out to former clients and convincing them to switch to their new employer.
Why is a covenant not to solicit important?
A covenant not to solicit is important because it protects businesses from losing key employees, customers, or vendors due to unfair competitive practices. Without this clause, former employees or business partners could exploit relationships built during their previous role to gain an unfair advantage.
For businesses, non-solicitation clauses help maintain stability by preventing former employees or partners from poaching staff, clients, or suppliers. These covenants are particularly valuable in industries where client relationships and employee expertise are major assets.
Understanding a covenant not to solicit through an example
Imagine a marketing agency hires a director of sales who builds strong relationships with key clients. When the director leaves to start their own agency, a covenant not to solicit in their contract prevents them from contacting former clients for 12 months. This ensures that the marketing agency doesn’t immediately lose valuable clients to a former employee.
In another case, a software company sells a portion of its business to another firm. As part of the sale agreement, the seller agrees not to solicit former employees to work at a new company for two years. This prevents the seller from taking key talent away from the buyer, allowing the new business owner to retain an experienced team.
An example of a covenant not to solicit clause
Here’s how a covenant not to solicit clause might appear in a contract:
“For a period of [X] months following termination of this Agreement, [Party Name] shall not directly or indirectly solicit, hire, or attempt to persuade any employee, client, or vendor of [Other Party Name] to leave their engagement with [Other Party Name]. This restriction shall apply regardless of whether the solicitation is for the benefit of [Party Name] or a third party.”
Conclusion
A covenant not to solicit protects businesses from losing employees, clients, or business relationships to former employees, partners, or sellers. These clauses help maintain business stability and prevent unfair competition after a contract ends.
By including a non-solicitation clause in agreements, companies can safeguard their workforce, retain key clients, and reduce the risk of business disruptions caused by former employees or partners attempting to lure away valuable relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.