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
XpertHR has added restrictive covenant and confidentiality agreements for Florida, Illinois, New York and Texas and a confidentiality agreement for California.
The restrictive covenant and confidentiality agreement may be used by a Florida employer to protect its business interests.
The restrictive covenant and confidentiality agreement may be used by a Texas employer to protect its business interests.
The restrictive covenant and confidentiality agreement may be used by a New York employer to protect its business interests.
The restrictive covenant and confidentiality agreement may be used by an Illinois employer to protect its business interests.
Updated to reflect forthcoming final overtime rule updating and revising the Fair Labor Standards Act (FLSA) overtime exemption requirements.
Updated to reflect forthcoming noncompete law.
Updated to include employment agreement provisions in the forthcoming Oregon Workplace Fairness Act.
Update to reflect law limiting the use of confidentiality agreements, effective July 1, 2019.
Updated to reflect forthcoming law regarding noncompete requirements.
HR guidance on the use of nonsolicitation agreements to prevent employees from stealing an employer's customers or clients.