Sometimes, it might be in the best interests of your business to protect yourself from customers being poached from your business by former employees.
A non-solicitation clause can do just that, helping to protect the interests of your business by preventing your former employees from actively seeking the business of your clients.
But what exactly is a non-solicitation clause, and when should you use it?
In this article, we’ll explain everything you need to know about non-soliciting clauses, from how you put this type of contract in place to when you should use it.
What Is A Non-Soliciting Clause?
Your business is highly successful, and you’re pleased with how it’s going.
This is partly down to your fantastic employees who have built relationships with your clients and vendors to bring in a constant stream of business.
But what happens if one of your employees decides to leave and takes your clients or your employees with them?
A non-solicitation clause prevents this from happening by prohibiting your employees from directly or indirectly soliciting any of your clients, vendors or employees for a pre-defined period of time.
What Is Included In This Clause?
Non-solicitation clauses are used to protect the employer from former employees poaching clients, vendors or employees from the business.
In order to make this type of agreement legally enforceable, it will need to contain certain things.
The non-solicitation clause should set out:
- That the employee is prohibited from soliciting a client or supplier that they have had direct contact with during their role.
- That the employee is prohibited from recruiting other employees from the business.
- How long the restriction applies after their departure from the business.
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Types Of Non-Solicitation Clauses
There are two types of non-solicitation agreements that you should be aware of: non-solicitation of customers and non-solicitation of employees.
Many non-solicitation clauses will include both of these types of agreement, but it’s important that you are aware of both and understand what each of them involves.
Non-Solicitation Of Customers
If your business relies on your employees working closely with your clients, you might want to consider putting a non-solicitation of customers agreement in place.
This type of agreement prevents your former employees from taking your clients with them to a new company.
This type of clause is often used in sales businesses, where the business is reliant on the customer relationship being carefully maintained by the employees.
For example, if a salesperson leaves their role and takes a list of their contacts with them, they would be breaking a non-solicitation of customers agreement if they tried to contact the clients to entice them to their new company.
Non-Solicitation Of Employees
It’s not always easy to find great employees for your business.
When you do find the perfect employees, you’re likely to spend hours of valuable time training them to be the best they can be and to represent your company the way you’d like.
If one of your employees leaves to start their own business or to join another established company, the last thing you want is for them to take other employees with them.
A non-solicitation of employees agreement ensures that departing employees cannot solicit your other employees and take them with them to their new company.
This helps to protect your business against several of your employees leaving to join a competitor at the same time.
Insure your business against ex-employee poaching clients, vendors and employees.
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When Should You Use A Non-Solicitation Agreement?
Many different types of businesses use non-solicitation clauses to protect the interests of their business.
This type of clause can be included in the contract of employment, in contractor agreements and in settlement agreements.
If you want to protect your business interests when an employee leaves the business, a non-solicitation clause might be the right way forward.
The clause can prevent the employee from recruiting other employees from your business or taking your clients with them to their new company.
Non-solicitation clauses are common in a wide range of industries. Here are some of the most common industries that use this type of clause to protect their business interests:
- Finance
- IT
- Legal
- Pharmaceuticals
- Professional services
- Sales
However, this type of agreement can be used in almost any type of business that wants to protect itself from the potential solicitation of employees and clients.
How Long Does A Non-Solicitation Clause Last?
Within the non-solicitation clause, you’ll need to specify how long it will last.
Whilst there is no set limit on how long this type of agreement can last, specifying an extended timeframe could lead to the agreement being challenged legally and potentially overturned in a court.
It is generally accepted that six months from the date of the employment being terminated is a reasonable timeframe for a non-solicitation clause to be in force.
However, if the member of staff in question was in a senior role, there may be justifiable cause to extend this to up to twelve months.
It’s essential that the timeframe you choose is reasonable and justifiable to avoid any legal challenges being brought against it.
Insure your business against ex-employee poaching clients, vendors and employees.
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Are Non-Solicitation Clauses Enforceable?
Non-solicitation agreements are legally enforceable in the UK.
However, this does not mean that these agreements can’t be the subject of a legal challenge, should the former employee believe that the conditions are unfair.
There are a few legal issues that you need to be aware of when making the decision to put a non-solicitation clause in place.
Firstly, you need to be specific, ensuring that the scope of the agreement is not too broad.
For example, you should only prohibit the employee from soliciting clients that they have had direct contact with during their role. This is because agreements have previously been overturned for being too broad if they relate to all customers of the business.
As mentioned in the previous section, it is also important that you carefully consider the duration of the agreement.
The duration should be both reasonable and justifiable, otherwise it could be overturned by a judge. It’s generally accepted that six months is a fair timeframe for a non-solicitation clause to be in place, unless there is a justifiable reason for the agreement to be longer.
You’ll also need to consider whether the employee brought any clients with them when they first joined your organisation.
If this is the case, you could face a legal challenge if you seek to prevent them taking the same clients with them to their next role.
Being aware of these potential legal issues can help you to put an effective non-solicitation clause in place that is less likely to be challenged.
If a legal challenge is brought, you will have a higher chance of winning the case and keeping the agreement in place if you have followed this advice.
What Happens If An Employee Breaks A Non-Solicitation Clause?
If you believe that a former employee has breached a non-solicitation clause, it’s important to seek specialist advice as soon as possible.
There is no set consequences for breaking a non-solicitation clause, as it would depend on the nature of the breach, the loss suffered by the organisation as a result and whether any other contractual terms or restrictive covenants have been breached.
The first step is usually to write to the former employee to explain that they are in breach of the clause and to ask them to stop. If this does not happen, legal action could potentially be taken against the ex-employee. This could include seeking damages, as well as an injunction that prevents the former employee from continuing to break the agreement.
Insure your business against ex-employee poaching clients, vendors and employees.
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What’s The Difference Between A Non-Compete Clause And A Non-Solicitation Clause?
It’s easy to get confused between non-solicitation agreements and non-compete agreements, and you might often see them used together. However, these are two different things with different meanings, and it’s important to understand the difference between the two.
A non-solicitation agreement prevents a former employee from soliciting the clients or employees of their former employer. There will be a time period attached to this, and potentially a location too. For example, there could be a clause in an employment contract that prevents an employee from soliciting clients from the business for six months after their departure from the business, within a 50 mile radius.
In contrast, a non-compete agreement prohibits an employee from starting their own business that is in direct competition with their former employer. This type of agreement will be in place for a set period of time, as well as within a certain radius of the business. For example, an employment contract may say that an employee is prohibited from starting their own business in direct competition with their former employer within 12 months of leaving the business, and within a 50 mile radius.
As you can see, whilst these two concepts do have some similarities, they are different in principle. Whilst the non-compete clause relates to starting a business in direct competition with their former employer, the non-solicitation clause relates specifically to the solicitation of clients and employees of the business.
Direct Vs Indirect Solicitation
It’s also important to be aware of direct and indirect solicitation. The majority of non-solicitation agreements only cover direct solicitation, so it’s essential that you understand the difference between these two types, so that you can make the right decisions for your business.
Direct solicitation means that the client is directly targeted by the former employee. For example, they may ring the former client, tell them that they have started a new job at another company and suggest that the client should move their business over to the new company. This also works for the solicitation of employees – an ex-employee could call a current employee and offer them an interview at the new company. This would be direct solicitation.
Indirect solicitation is where the lines become slightly blurred. This could involve the ex-employee suggesting that someone else in the new business makes contact with their old clients. Alternatively, it could involve the business advertising in a place that the ex-employee knows their ex-clients will be, for example in a trade publication. It can be difficult to prevent a company from advertising their business, as it is the right of any business to promote themselves. For this reason, it can be difficult to prohibit most types of indirect solicitation, unless there has been a clear breach of contract.
Insure your business against ex-employee poaching clients, vendors and employees.
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Related Questions
Is Non-Solicitation Legal?
A non-solicitation clause is legal in UK law. However, it is important that you ensure that your non-solicitation clause is properly written and avoids being too broad to ensure that it will be legally enforceable. It’s best to seek specialist advice before putting a non-solicitation agreement in place to ensure that it will hold up in a court of law if challenged.
What Is Considered Non-Solicitation?
Non-solicitation clauses can cover clients, vendors and employees, depending on the individual terms of the agreement. This clause typically means that the ex-employee cannot take clients, employees or vendors from their former employer for a specified duration. This type of agreement aims to protect the business when an employee leaves the company.
In Summary
Non-solicitation agreements can be an extremely useful tool for businesses across a wide range of industries, helping to protect their interests when an employee leaves the business. This type of agreement can prevent the employee from taking clients or other employees with them, helping to limit any damage to the business from the departure of the employee.
If you need help putting a non solicitation clause in place, or if you’re looking for more information on this type of agreement, we’re here to help. At Neathouse Partners, we have a team of expert HR advisors on hand, waiting to give you advice on all aspects of HR and employment law. Contact us today to receive specialist advice tailored to your business.
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