HR Support on Nonsolicitation Agreements

Editor's Note: Prevent customers and clients from being poached!

Melissa A. SilverOverview: One type of employment contract is the nonsolicitation agreement. A nonsolicitation agreement or clause typically prohibits an employee from directly or indirectly asking the employer's customers and clients to leave the current employer and join the departing employee in a new business or venture.

Nonsolicitation agreements are looked upon more favorably than noncompete agreements. However, like noncompete agreements the degree to which they are enforced varies per state. Unlike a noncompete agreement, the geographic area affected by a nonsolicitation or antisales covenant is typically limited to the area in which the customers of the former employer are located and the restriction - even within that area - applies only to those customers. Further, the time period for the nonsolicitation limitation must be reasonable and employers need to carefully draft language to ensure they are not overly broad. Otherwise, the nonsolicitation agreement may be unenforceable providing employer's clients or customers with the opportunity to join the departing employee and leading to reduced revenue should the customer or client decide to leave.

Trends: One key issue that courts focus on when confronted with a challenge to a nonsolicitation agreement is whether the agreement protects the employer's goodwill in its industry as well as the goodwill the employer acquired through its own resources. Where an employer spends a significant amount of time and money cultivating and retaining its client or customer base, it has a stronger argument defending a nonsolicitation agreement. Courts are less likely to enforce an agreement if the nonsolicitation terms extend beyond the customers or clients that the employee had actual interaction with.

Author: Melissa A. Silver, JD, Legal Editor

Latest items in Nonsolicitation Agreements

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    Type:
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    In-depth review of the spectrum of Oregon employment law requirements HR must follow with respect to terms of employment.

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    Date:
    04 June 2015
    Type:
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    Hiring away a rival's key performer can bring a host of risks for unwary employers. On this XpertHR podcast, Texas employment attorney Mary Goodrich Nix details the litany of risks that can arise, especially if the new hire signed a restrictive covenant with his former employer, but also offers practical solutions.

  • Terms of Employment: Indiana

    Type:
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    In-depth review of the spectrum of Indiana employment law requirements HR must follow with respect to terms of employment.

  • Multistate Employer: Federal

    Type:
    Employment Law Manual

    This section helps HR professionals manage challenges that come with operating in multiple states, notably complying with differing state and key municipal laws, and addresses the pros and cons of having a centralized or decentralized HR department. Trends currently affecting multistate employers are identified, such as same-sex marriage laws and tracking various state leave laws, are discussed.

  • Terms of Employment: Delaware

    Type:
    Employment Law Manual

    In-depth review of the spectrum of Delaware employment law requirements HR must follow with respect to terms of employment.

  • Terms of Employment: Oklahoma

    Type:
    Employment Law Manual

    In-depth review of the spectrum of Oklahoma employment law requirements HR must follow with respect to terms of employment

  • Two-Year Minimum for Restrictive Covenants Still Stands in Illinois

    Date:
    18 October 2013
    Type:
    News

    Restrictive covenants will continue to be enforceable in Illinois only when the employee is employed for at least two continuous years, after the Illinois Supreme Court declined to review a case challenging this standard.

  • Financial Services Resource Center for HR: Restrictive Covenants

    Date:
    28 June 2013
    Type:
    Editor's Choice

    XpertHR's Financial Services Resource Center for HR helps financial services employers handle their most challenging employment issues by bringing relevant resources together in one place for easy access.

  • Employer Protection Against Solicitation Extended in Oklahoma

    Date:
    07 June 2013
    Type:
    News

    Oklahoma has expanded the protection of employer interests with a new law enforcing nonsolicitation contracts prohibiting employees or independent contractors from soliciting an employer's employees or independent contractors to become employees of another person or business.

  • Oklahoma Content Updated to Include Nonsolicitation of Employees Law

    Date:
    06 June 2013
    Type:
    Editor's Choice

    The Oklahoma Terms of Employment, Employee Communications and Employee Discipline sections of the Employment Law Manual have been updated to include a new Oklahoma law effective November 1, 2013 enforcing nonsolicitation of employee clauses in employment agreements.

About this topic

HR guidance on the use of nonsolicitation agreements to prevent employees from stealing an employer's customers or clients.