INTRODUCTION:

A Non- Solicitation is a contract signed between the employer and the employee according to which the employee agrees to the terms and conditions of the employer to not to solicit any Client or Customer of the company. A Non-Solicit agreement is an agreement stating that if an employee leaves the company then they will not engage in any business with the clients or the customers of the company and nor will they be allowed to try to get other employees to leave the work this kind of solicitation is known as ‘Poaching’.

In other words, Non- Solicit Agreement refers to an agreement signed between the employer and the employee which prohibits the employees from using any of the clients, customers, and contact lists of the company for any personal gain after leaving the company. It is an agreement mostly signed during the appointment of a new employee. It is generally included in the employment contract with the Non-Compete Agreement or the Non-Disclosure agreement. A non-solicitation agreement might include based on the discretion of the employer an agreement according to which an employee is not allowed to solicit other employees of the organization to leave when he or she quits or moves on from the organization. The Non- Solicitation agreement is most commonly used in service or sales businesses, in a company having direct dealing with a large number of customers and consumers, a company providing specialized services to its customers, like law firms, advisory firms, etc. All of this depends completely upon the discretion of the organization as to what do they need to cover to keep their business protected and what all things can cause them damages if misused by the outgoing employees. Although Non- solicitation agreements are regulated by the laws made in various states regarding them, statutes, legislation, conventions, jurisdictions, terms of scope, etc but their enforceability is complex and subject to various laws made in different states to govern them.

NON-SOLICIT AGREEMENT:

It is a common contract clause which states in regard to the employees that if they are working for a competitor or working in such a way creating any competition to the company then they are prohibited from soliciting any of the company’s clients, customers, employees, or use any confidential information of the company or any other information about a company which he/ she might have learned during their employment period with the company. In other words, an employee cannot use any of the old company’s contacts or information to help their new company. It works as a contract between the company and its management and the employees of the company.

The Non- Solicit agreement outlines restrictions against soliciting current employees. This agreement can be introduced by the employer to their employee anytime during their professional relationship, but in general, it is done at the time of hiring a new employee so as to avoid any confusion or disputes arising in the future due to delay in presenting the agreement to the employee in case of any infringement. This agreement is drafted to protect important employees and customer relationships. This agreement can also be applied during the company’s sale or restructuring. Through this agreement, companies can also stop indirect and passive solicitation which means that a former employee who starts a new business after leaving the company can't advertise. A company that advertises that it has appointed a salesperson from another company is definitely against the rules and regulations of non-solicitation and should be part of an agreement. Companies also use Non- Solicitation agreement for deciding the IP ownership. If all the intellectual property is created by the employees during their employment period then it becomes easier to keep them safe when the employees quit the company. The two main purpose for which a company drafts a Non- Solicitation agreement are:

1. From restricting former employees from soliciting its customers, clients, etc.

2. From restricting former employees from soliciting their current employees.

ENFORCEABILITY OF NON-SOLICITATION AGREEMENT:

A Non- Solicitation enforceability is quite complex because state law may not allow an employer to require employees to sign a Non-solicitation agreement as it is totally subjective to the various laws made by different states in governing the agreement. But in general, for a Non- Solicitation agreement to be enforceable it requires:

1. The employer must have valid business reasons for making employees sign this contract. The reason such as protecting a valuable customer list associated with the company, protecting trade secrets or other valuable information of business of the company, or protecting the company from the leaving of valuable and good employees with specialized skills, knowledge, and access to trade secrets.

2. Customers must be valuable to the company and worth protecting. the company must have given good efforts and hard work and spent time, energy, and money establishing its client database which must contain information that isn’t readily available to the general public.

3. The employees, customers, and clients of the company can leave voluntarily and freely according to their will. A non-solicitation agreement can’t restrict a client, customer, or employee from moving out of a company and to a competitor voluntarily. If the customers want to take their business to a competitor then a Non-solicitation agreement can’t stop them from doing so, unless the competitor has improperly pressured them or used the previous employer’s information to get benefit in their business.

4. The agreement in any way shouldn't shut the employee out of a job. The agreement is supposed to stop employees from using insider knowledge to poach customers or pressure, other employees, into joining them and not getting them binding to the company and prohibiting them from exercising their free will of staying in the company or not.

TERMS AND CONDITIONS OF NON-SOLICITATION AGREEMENT:

Every agreement must contain certain guidelines on which the agreement is based. These guidelines are generally known as the terms and conditions of the agreement. The Non- Solicitation agreement requires the terms for both party’s mutual acceptance and well protection and satisfaction. According to the agreement, the employee acknowledges that he/ she will not for a certain period after leaving the company:

1. Approach any customer, affiliate, or business partner of the Employer with the motive of seeking employment or conduct business creating competition with the Employer’s business;

2. Approach, entice, solicit, or contact any individual who is working in employment with the company for any reason.

3. He/ she will provide the Non- Solicitation agreement to all future employers during the duration of enforceability of this non-solicitation agreement.

4. Agrees that all provisions of the agreement are fair and just. If at any time in the future if any provision is not applicable so all other provisions shall continue to remain in effect.

5. Acknowledges that any infringement in this contract will be subject to court rulings and will be liable for direct and indirect damages incurred by the employer.

HOW TO DRAFT A NON- SOLICITATION AGREEMENT:

1. Acknowledgment clause:

This is the first clause of the agreement which specifies the parties to the agreement, the date of the agreement, and reasons for drafting such agreement.

2. Definition clause:

This clause defines the agreement about the reason for it being drafted, what impact does such drafting has, and what the agreement actually means.

3. Non- Solicitation clause:

This clause mentions all the terms and conditions of the contract based on which such a contract is formed. It consists of sub-clauses such as Non-Solicitation of Customers, Non-Solicitation of Employees, Presentment to any New Employer.

4. Restriction clause:

This clause defines restrictions so imposed and agreed by the booth the parties to the agreement. These restrictions are the main cause for which such agreement is formed.

5. Compensation clause:

This clause defines the amounts of compensation the parties to the agreement needs to bear in case of any infringement to the terms and conditions of the agreement.

6. Governing law clause:

This clause consists of all the legislations, statutes, laws, precedents, etc which governs the agreement and in light of which guidelines such agreement is drafted

7. Sign off:

This clause consists of the signature of the parties to the agreement and the witnesses to the agreement. This clause is essential to prove the involvement and acceptance of the parties in forming such an agreement.

To know more about, how to draft a non-solicitation agreement, see the video below -

BY –

GAURAV GUPTA