Non-Solicitation Clause - Explained
What is a Non-Solicitation Clause?
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Table of ContentsWhat is a Non-Solicitation Agreement?What does a Non-Solicitation Clause Include?Academic Research on Non Solicitation Clauses
What is a Non-Solicitation Agreement?
It is an agreement typically signed between an employer and employee that restricts the employee from soliciting the clients or other employees after leaving the current job. The employees of a company have access to the client list of the company. After leaving the job, an employee may approach the clients of his or her former employer on behalf of his or her new employee or his or her own business. The employee may also approach the other employees for working with him or her in the new business. The non-solicitation agreement restricts both of these. A non-solicitation agreement may be a stand-alone agreement, or it may be a clause included in broad another agreement such as employee agreement or independent contractor agreement.
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What does a Non-Solicitation Clause Include?
There are three types of restrictive covenants, non-solicitation agreements, non-compete agreements, and non-disclosure agreements. All of these restricts the employees to use any information or connection gained from the employer for personal benefit. A company doesnt want their employees to leave their company and join a competitor. If one employee gets a better offer from a competitor, the employee might want to take fellow efficient employees with them. This happens especially when a high ranked official decides to leave the company. Companies restrict this scope with a non-solicitation agreement. If the employee breach this contract, a lawsuit can be filed against the employee. For example, Nikki decides to leave her present company X in order to join another company Y. John works under Nikki and Nikki knows John is efficient in his works. Nikki might want to approach John to leave company X and join Y with Nikki. If there is a non-solicitation agreement is in place Nikki wont be able to take John with her in the new company. Non-solicitation can also be included in the sale of a business agreement. Catherine sells her company to X enterprises. Catherine might want to take some of her efficient staffs with her to work in her new venture. With a non-solicitation agreement in place, this scope is restricted. Similarly, the companies do not want to lose out their clients to the competitors. If the leaving employee has the access to the client list, they employee might solicit those clients on behalf of the new company. The non-solicitation agreement prevents this by putting the restriction on the employee. The law concerning the non-solicitation agreement varies from one state to another. The court decides from case to case if the agreement is breached by the employee. The law of California says the restrictive covenants are unenforceable unless it involves divulgence of trade secrets.
Academic Research on Non Solicitation Clauses
- Do strict trade secret andnon-competition laws obstruct innovation, Graves, C. T., & DiBoise, J. A. (2006).Entrepreneurial Bus. LJ,1, 323. According to this paper, a study was carried out to examine whether overboard trade secret laws and the non-competition covenants operates to impede the growth of small scale creative business especially those firms founded by former workers of larger and bigger companies. This paper explains this concept via the nascent scholarship and asked several questions as regards future research by economist, analysts or legal scholars. Also, this study analyses the fiduciary duty, trade secret law, non-competition and the bodies of law which was defined as the law of the employees mobility. This study finally submits that reforms would actually go a long way in correcting the damages and promote innovations.
- An empirical analysis of noncompetitionclausesand other restrictive postemployment covenants, Bishara, N. D., Martin, K. J., & Thomas, R. S. (2015). Vand. L. Rev.,68, 1. This paper adopted the use of a large sample of the publicly available CEO employment contracts and was able to determine the non-competition bindings which include the post-employment bindings also known as the noncompetes, non-disclosure agreements, and the non-solicitation agreements. The result gotten from this result attests to some archaic assumptions about restrictive bindings as well as other surprises. Several undocumented issues were also uncovered in the course of this research paper. Issues like a big trend concerning the restrictive bindings appearing in several cases with an increase in the enforcement right for the firm. Also, a clear dependent path for these clauses was found with preceding CNC being a convincing pointer of their importance in the future employment contracts. Other issues were also discovered in the cause of this study.
- Covenant Not to Compete,Nonsolicitation and Trade Secret Provisions of Stock Purchaser Agreements, Levine, J. A. (1985). Mich. BJ,64, 1248. This paper explains the covenant not to compete, the non-solicitation and the trade secret provisions of the stock purchaser agreement. The correlation between these three factors was also discussed in this paper. Drafting EnforceableNon-Solicitation Agreements in Kentucky, Nicholas, E. E. (2006). Drafting Enforceable Non-Solicitation Agreements in Kentucky.Ky. LJ,95, 505. According to this research paper, the drafting enforceable non-solicitation agreement was studied and Kentucky was chosen as a case study.
- The Growing Disfavor ofNon-Compete Agreements in the New Economy and Alternative Approaches for Protecting Employers' Proprietary Information and Trade, Nicandri, A. S. (2010). U. Pa. J. Bus. L.,13, 1003. This paper examine the disfavor of the non-compete agreements in the New economy as well as the various approaches to consider in protecting the employers proprietary trade and information.
- Validity ofNonsolicitation Clausesin Employment Contracts, Courville, C. A. (1987). La. L. Rev.,48, 699. According to this study, the validity of the non-solicitation clause in employment contracts was examined. Several tests were carried out to make sure there are no issues with the non-solicitation clause in this study.
- Non-Compete Agreements-An Overview, Corrigan Jr, W. M. (1998). J. Mo. B.,54, 140. This academic research thesis explains the non-compete agreement in general. An overview of the general idea as to what the Non-compete agreement means and how it has helped to make or mar the economy/firm was discussed in this paper.
- Blocked Airwaves: Using Legislation to MakeNon-CompeteClausesUnenforceable in the Broadcast Industry and the Potential Effects of Proposed Legislation in, Kist, C. T. (2006). Vill. Sports & Ent. LJ,13, 391. This paper used the Legislature to make non-compete clauses unenforceable in the Broadcast industry and the potential effects of the proposed legislation was also discussed in this study.
- Litigation between competitors with mirror restrictive covenants: A formula for prosecution, Anenson, T. L. (2004). Stan. JL Bus. & Fin.,10, 1. In recent study of the competitive business environment, most companies adopt the use of non-compete clause to monitor the employees loyalty and to retain a competitive edge over other companies. Note that litigation becomes the order of the day as the use of non-competition pacts continues to triumph in the industry-wide basis after on business/firm hires the employee of another firm which indirectly violates the agreement in the restrictive covenants according to their employment agreements. This paper however explains the importance of an equivalent agreement which can be used to counter the challenge as regards the enforceability of the post-employment conditions and also in playing by the rules as regards validity.
- US CEO Employment Agreements andNon-Competition Provisions: A Literature Survey, Thomas, R. S., & Bishara, N. (2015). US CEO Employment Agreements and Non-Competition Provisions: A Literature Survey. This paper combines the current research as regards the CEO employment contracts and also examines the underlying research on a more explicit area of these agreements and the noncompete clause. The test evaluates the main result in the former academic research journal from economics and finance as well as law on the American CEOs employment contract and the non-competition agreements. It was noted in this study that the terms of the firm-CEO employment agreements are genuine evidence of the role of the executives which often a times is overlooked and thus not clearly explained.