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Non-Solicitation Agreements

Non-Solicitation Agreements Columbus, OH

If you’ve worked hard to build your client or customer base, or even put significant time and effort into training your employees or recruiting the right subcontractors, you probably want to protect that investment. Non-solicitation agreements are typically used by businesses of all sizes to ensure that their employees and subcontractors will not solicit (or run off with) the company’s customers, clients, or even other employees or contractors that the company has worked so hard to find and develop in the first place. ​

The right contract language protecting the investment your business has in its relationships may take the form of a standalone agreement, but it can also be a clause in an existing contract. For example, you might include a non-solicitation clause in an employment or independent contractor agreement. In some instances, we’ve even seen non-solicitation clauses included in operating or partnership agreements to make sure that if a business partner leaves the business, they don’t try to take all of the customers with them!

How does a non-solicitation agreement different from a non-compete or a non-disclosure agreement?
Non-solicitation agreements are often used in conjunction with non-competes and nondisclosure agreements. Together, these types of agreements or clauses are referred to as restrictive covenants–contractual promises that restrict what one (or sometimes both) of the parties to an agreement can do during and even after the agreement terminates. So how do these agreements differ?

  • A non-solicitation clause restricts poaching (or attempts to poach) certain defined groups, i.e. a particular group of customers.
  • ​A non-compete clause restricts competition, i.e., an employee cannot engage in activities that compete with your business when they leave your employment, even if those activities don’t involve your existing customers.
  • A nondisclosure agreement restricts the sharing and unapproved uses of confidential information. This might even include your client list.

Depending on the circumstances, your business may only need one or two of these clauses or agreements, or you might need to have all three depending on what business information, relationships, and activities you are trying to protect. For example, a non-solicitation clause might prohibit a former employee or contractor from calling up your customers and asking them to follow that worker to their new business. But it wouldn’t prohibit your customers from reaching out to that former worker (especially if they have a relationship with that individual) and deciding on their own accord to follow the former employee or contractor. To prevent the latter situation, a non-compete agreement would be more appropriate because it would prevent the former employee or contractor from taking on your customers despite the customer’s wishes. (Of course, before going down this road, you’ll have to decide whether such a situation would only antagonize your customers/clients. And you need to be especially careful with independent contractors who are often running their own businesses and may already have business relationships with your competitors.)

Enforcing a Non-Solicitation Agreement
Generally, non-solicitation agreements are enforceable in Ohio. However, they need to be carefully drafted if you actually expect a court to enforce the agreement. Too often, a client will ask us to draft a non-solicitation clause that reaches well beyond protecting the client’s legitimate business interests. Let’s say, for example, that you want to prohibit former employees or contractors from soliciting business from any client that your company has ever done business with. This type of language would presumably extend to customers you haven’t worked with or even interacted with in years. It would even include clients that the former employee or contractor in question has never worked with. 

Courts will often treat these types of broad, far-reaching non-solicitation clauses much like non-compete clauses. The court will ask whether the restrictions:

  • Are no greater than what is required to protect the business;
  • Impose an undue hardship on the former worker; and
  • Injure the public.

See e.g., Professional Investigations v. Kingsland.

In this example, the non-solicitation language you want would go well beyond what is necessary to protect your business’s interests. It potentially hampers the employee’s or contractor’s ability to work in their given career field, especially if your business has, at one time or another, worked with a significant portion of your target market. If your goal is simply to make someone’s life difficult if they stop working for you, then there’s a good chance your contract language won’t be enforceable.

Key Takeaways
Non-solicitation clauses, like non-compete agreements, should include reasonable restrictions limiting their scope:

  • Focus on customers, clients, employees, or contractors that the impacted worker will develop a working relationship with while they are working for your business.
  • Consider reasonable geographic limitations, especially if you have customers or clients in other states. It’s one thing to limit a former employee’s or contractor’s ability to solicit your clients in the market that person was actually working in. It’s quite another to suggest that they can’t solicit clients from your second location across the state or even across the country, especially if they had no interactions with those clients. 
  • Incorporate reasonable time limitations, e.g., the former employee or contractor cannot solicit customers that entered into agreements with your business within the last two (2) years. 
  • ​Don’t try to combine a non-solicitation clause and a non-compete clause into one sentence. Yes, we attorneys tend to use 100 words where 10 might do, but these clauses serve different purposes and are meant to accomplish different things. Keep them separate to avoid unnecessarily muddying the waters.
  • Finally, get it in writing, and get it signed! I’ve never seen a court enforce a verbal restrictive covenant. And just burying non-solicitation / non-compete language in your employee handbook isn’t good enough either because your employee handbook is not (or at least shouldn’t be) a contract. 

Please schedule a consultation if you have questions about using non-solicitation agreements to ​protect your business relationships.

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