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Should You Protect Your Business Using a Non-Solicitation Agreement?
For most business owners, employees, vendors, and customers are essential to keeping your business successful. When someone with inside knowledge about your vendors, employees, and customers leaves your company, your business becomes vulnerable to losing these critical assets to competitors. To protect your company from such risks, consider using a non-solicitation agreement.
What Is a Non-Solicitation Agreement?
A non-solicitation agreement creates a contractual relationship between an employer and an employee, restricting whom the employee can solicit after departing the company. These agreements prevent former employees from using information gained while working for you for the benefit of your competitors. You can incorporate non-solicitation agreements into other agreements like employment contracts, or they can stand alone. These agreements can also be used in conjunction with nondisclosure agreements to prohibit former employees from using your company’s trade secrets and confidential information, including information about your customers, key employees, and vendors, to provide new contacts to a competitor. In any instance, the goal of non-solicitation agreements is to protect the relationships you, as a business owner, have developed so competitors cannot gain access to them through one of your former employees and use those relationships for their benefit.
To ensure that your non-solicitation agreement is enforceable, it is vital to keep a few points in mind.
- State Law. The legislation pertaining to non-solicitation agreements varies from state to state because states must balance competing interests—protecting a business’s hard-earned sweat equity while promoting healthy competition and the right of employees to freely seek employment without restriction. In California, non-solicitation agreements are unenforceable on the basis that they infringe upon one’s freedom to pursue gainful employment and business opportunities. In other states, enforceability differs depending on the profession or industry in question. Understanding the specifics of your state’s laws is therefore critical to ensure that your non-solicitation agreement is enforceable.
- If a non-solicitation agreement or provision is found by a court to be overly broad, it will most likely be deemed unenforceable if a former employee contests it. For example, a non-solicitation agreement cannot restrict a departing employee from working with a company in an industry that does not directly compete with the original employer’s business. The agreement must address the specific areas of competition at issue. When drafting non-solicitation agreements or provisions, it is imperative to limit the scope to the specifics of your business.
- Many state courts will find an agreement unenforceable if the term of the agreement is excessively long. For example, in some states, periods exceeding one year have been deemed too long and against public policy. Accordingly, if you are interested in implementing a non-solicitation agreement, seek the advice of an experienced business law attorney to ensure that the duration of the agreement is limited to the shortest time frame necessary to protect your business’s interests.
Contact Littleton Legal to discuss the best way to legally protect your relationships with employees, vendors, and customers. Our team of experienced attorneys are here to help your business succeed. Give us a call today at (918) 608-1836 to set up a complimentary initial consultation.