Non-solicitation agreement: Overview, definition, and example
What is a non-solicitation agreement?
A non-solicitation agreement is a legal contract between two parties, typically an employer and an employee, that prohibits one party from soliciting or attempting to attract the other party's customers, clients, employees, or business opportunities for a certain period of time after the agreement ends. The primary purpose of a non-solicitation agreement is to protect a business's relationships, goodwill, and workforce from being poached by former employees, contractors, or business partners.
This type of agreement is often used in employment contracts or business sale agreements to ensure that the departing party does not take clients, employees, or business opportunities with them after leaving the organization or ending the business relationship.
Why is a non-solicitation agreement important?
A non-solicitation agreement is important because it helps businesses safeguard valuable relationships and intellectual property. For employers, these agreements provide protection from losing clients, customers, or employees to a competitor or a former employee, which could harm the company's operations and competitiveness.
For employees or business partners, understanding a non-solicitation agreement is crucial as violating the terms could lead to legal consequences, such as financial penalties or legal action. Having a clear non-solicitation clause also helps to set expectations and prevent disputes in the future.
Understanding non-solicitation agreement through an example
Imagine a sales executive who works for a tech company and builds strong relationships with several key clients over the years. Upon leaving the company, the sales executive agrees to a non-solicitation agreement that prevents them from directly contacting or attempting to attract these clients to a new company for one year. If the executive violates the agreement by soliciting the company’s clients for their new employer, the company could take legal action based on the terms of the non-solicitation clause.
In another example, a company may require employees who leave to sign a non-solicitation agreement preventing them from hiring their former colleagues to join a competitor for a specified period of time after leaving. This helps prevent a mass exodus of employees and protects the company’s workforce from being recruited away by former employees.
Example of a non-solicitation agreement clause
Here’s what a non-solicitation agreement clause might look like in an employment or business contract:
“For a period of [X] years following the termination of employment or business relationship, the Employee/Contractor agrees not to solicit or attempt to solicit, directly or indirectly, any clients, customers, or employees of the Company for the purpose of engaging in a business that competes with the Company’s business or seeking to divert business opportunities from the Company.”
Conclusion
A non-solicitation agreement is a critical tool for protecting a company’s relationships, intellectual property, and human resources. It helps prevent former employees, contractors, or business partners from using confidential information or relationships to their advantage after leaving the business.
For businesses, having a non-solicitation agreement ensures that they can retain customers and protect their workforce, while for employees and business partners, understanding the scope and terms of the agreement is essential to avoid legal disputes in the future.
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.