Virtual General Counsel LLC
Virtual General Counsel LLC

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How can non-solicitation agreements protect your business?

| Sep 18, 2020 | Contracts |

You want your employees to have a good relationship with your clients. That only benefits you and helps you grow your business. But what happens when one of those employees leaves and moves to a new business – or starts of one their own? They may have clients who are loyal to them and want to follow them. That can mean a big loss of income for you.

You can help curtail these losses with non-solicitation agreements. This is a key employment agreement that it may be wise to ask all new hires to sign.

Non-solicitation agreements can be drawn up in different ways. You may forbid an employee from contacting any of your business’s clients for a specified period after they leave your company. This gives you time to touch base with your former employees’ clients and assure them that they’re a valued customer of your business and will still receive personal, quality service from one of your other employees.

However, that wouldn’t prohibit your employee from telling a client where they’re going so that a client can reach out to them. That’s why it’s often best to stipulate that an employee may have no contact with your business’s clients (regardless of who initiates it) for a given period after they’ve left.

The terms of the agreement need to be reasonable. You have a right to prohibit employees from leaving and taking their clients with them. However, having a provision that prohibits them from ever doing business with clients they met (or maybe even recruited) when they worked for you would likely be deemed unreasonable and unenforceable if your former employee took the matter to court.

It’s typically wise to include a provision in the agreement that employees can’t take any customer information (or any other confidential or proprietary information) with them when they leave – whether they use it or not.

Note that a non-solicitation agreement isn’t the same as a non-compete agreement. Those are more restrictive because they generally prohibit employees from working for a competitor for a specific period after they leave your company.

Protecting your business while not scaring away good employees with overly restrictive agreements can be a tightrope walk. An experienced attorney can help you determine what agreements you should require your employees to sign and how best to craft those agreements so that they’re fair yet binding.