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.
Author: Melissa A. Silver, JD, Legal Editor
Multistate employers face the challenge of complying with not only federal laws, but also differing state and local laws. This section highlights some of the states' differences in terms of preemployment testing and background checks, noncompetition and nonsolicitation agreements, and discrimination, pay and leave rules.
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.
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.
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.
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.
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.
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.
In-depth review of the spectrum of Oregon employment law requirements HR must follow with respect to terms of employment.
A federal district court's ruling in Indiana reinforces the effectiveness of restrictive covenants to protect an employer's competitive edge in its industry.
HR guidance on the use of nonsolicitation agreements to prevent employees from stealing an employer's customers or clients.