Topics
HR Support on Nonsolicitation Agreements
Editor's Note: Prevent customers and clients from being poached!
Overview: 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.
Melissa A. Silver, J.D., Legal Editor
Latest items in Nonsolicitation Agreements
-
Terms of Employment: Texas
In-depth review of the spectrum of Texas employment law requirements HR must follow with respect to terms of employment.
-
New Content Added on Restrictive Covenants
XpertHR had added certifications that employers should provide to new hires to ensure that they are not subject to any restrictions on competition or subject to an agreement that would prevent them from using the confidential information of a former employer. The Terms of Employment section of the Employment Law Manual also now includes a discussion on obtaining these certifications at or prior to hiring.
-
Terms of Employment
The terms and conditions that govern the employment relationship are typically governed by federal and state employment laws, including antidiscrimination laws. This section helps HR professionals avoid discriminating on the basis of race, color, religion, sex, pregnancy, national origin, age, disability, genetic information and veteran status throughout the employment relationship.
-
Terms of Employment: New York
In-depth review of the spectrum of New York employment law requirements HR must follow with respect to the terms of employment.
-
Terms of Employment: Tennessee
In-depth review of the spectrum of Tennessee employment law requirements HR must follow with respect to terms of employment.
-
High-Tech/Software and Communications Resource Center for HR: Restrictive Covenants
XpertHR's High-Tech Resource Center for HR: Restrictive Covenants helps high-tech employers handle their most challenging employment issues by bringing relevant resources together in one place for easy access.
-
Terms of Employment: Oregon
In-depth review of the spectrum of Oregon employment law requirements HR must follow with respect to terms of employment.
-
Terms of Employment: Massachusetts
In-depth review of the spectrum of Massachusetts employment law requirements HR must follow with respect to terms of employment.
-
Do Not Underestimate the Power of a Restrictive Covenant!
A federal district court's ruling in Indiana reinforces the effectiveness of restrictive covenants to protect an employer's competitive edge in its industry.
About this topic
HR guidance on the use of nonsolicitation agreements to prevent employees from stealing an employer's customers or clients.