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
Updated to reflect forthcoming law regarding restrictive covenants for personal support workers; and amendments to law regarding noncompete agreements.
Updated to reflect forthcoming law regarding noncompete requirements.
Updated to reflect information on a state appeals court case regarding sexual assault claims and arbitration agreements.
Updated to reflect proposed regulations that would update and revise the Fair Labor Standards Act (FLSA) overtime exemption requirements.
Updated to reflect information on a state supreme court ruling concerning noncompete agreements.
Updated to include amendments to noncompete law regarding physicians, effective April 2, 2018.
The Department of Justice may soon bring criminal enforcement actions against employers that have "no poaching" agreements in place not to recruit certain employees or not to compete on compensation terms.
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Restrictive covenants of all types (e.g., non-competition, customer non-solicitation and employee non-solicitation) are widely used across the country. But there is no uniform federal law governing their enforceability. Proskauer Rose employment attorneys John Barry and Guy Brenner survey the landscape and share their tips.
HR guidance on the use of nonsolicitation agreements to prevent employees from stealing an employer's customers or clients.