What are Non-Solicitation Clauses?
Non solicitation clauses:
- are a type of restrictive covenant
- included in contracts of employment, contractor agreements and share purchase agreements
- to protect the workforce of a business
- post termination: after the employee, contractor or seller are no longer associated with the business.
Non-Solicitation Agreements
Non solicitation clauses can appear in employment contracts, service agreements, contractor agreements and share purchase agreements: ie contracts for the sale of a business.
What do non-solicitation covenants protect?
Non-solicitation clauses are primarily directed at protecting [trade connections].
Businesses are entitled to prevent ex-employees, ex-consultants and former business owners (ie leavers) from exerting influence of this kind over their clients and customers.
They prevent a leaver requesting, attempting to persuade or encouraging customers and suppliers to transfer their business to another business.
What is a Solicitation?
“Solicitation” requires:
- a direct and specific appeal to a customer or supplier rather than a more general approach..
To draw the contrast, in one case an advertisement in the local newspaper was not sufficiently targeted to amount to solicitation.
- a personal connection is a prerequisite to justify protection of the legitimately protected interest of the business.
That’s because non solicitation causes are based on an ability to influence and encourage the customer or supplier to transfer their business to the new business that the leaver is associated with.
An underlying degree of "influence" is needed: There must be an active component and a positive intention to coax the customer or supplier to join the leaver at the business that they are associated with.
The greater the persuasion on the part of the leaver, the more likely it will be a solicitation.
The terms “canvass” and “entice away” are usually taken to have the same meaning as non-solicit.
When does a solicitation actually happen?
The “solicitation” occurs when the person leaving the company (such as a contractor or consultant) asks the customer or supplier to transfer their business from the business which has the non solicit restrictive covenant with them, to their new business. It’s an approach with a view to appropriating the customer's business or custom.
When deciding whether a solicitation has taken place, courts usually want to know the factual background of the alleged solicitation, to ascertain whether a solicitation has actually taken place.
- Who was the first to initiate contact with the customer or supplier? Was it the leaving contractor or employee , or was it the customer or supplier themselves?
- Was there a previous relationship between the ex-consultant or ex-employee and the customer or supplier?
If the leaver hasn’t had a previous relationship with the customer or supplier, then it's less likely that a non solicit restrictive covenant will be reasonable for the purposes of protecting the legitimate interests of the business claiming it should have the benefit of the non-solicitation clause.
Non-Solicitation Period: Duration
The time period that a non solicitation restrictive covenant lasts is likely to be a persuasive factor in the enforcement of a restrictive covenant: 6 months in most industries is considered short and therefore more likely to be enforceable.
But then an acceptable time limit will depend on a [whole host of factors].
Example: Non-Solicitation Clause
An example of a simple non-solicitation clause reads like this:
During the term of this Agreement and for a period of 12 months after termination the Leaver will not either on its own account or for any firm or company other than the Protected Business solicit, canvass, or entice away from any person, firm, company or organisation which has dealt with the Protected Business in the 12 months prior to termination
The truth is though that non solicitation clauses get far more complicated than that. Companies also rarely rely on one form of restrictive covenant.
Breach of Non Solicitation Clauses
The decided case law - previous cases where a non-solicitation clause has been found to be unenforceable or not - does not decide the issue for any particular new case. It only serves as guidance for new cases.
A variety of restrictive covenants are used together to prevent different strands of behaviour by independent contractors and employees once they have left the business. If a consultant or employee foes not breach a non solicitation clause does not mean that other restrictive covenants are not breached.
Each are assessed independently of one another.
The background facts of any particular case makes a real difference to whether or not any restrictive covenant is unenforceable (or not).
Non Solicitation Solicitors: Restrictive Covenants
Need legal advice on whether a non-solicitation agreement to find out about the enforceability of a restrictive covenant?
We're advise companies on the full suite of restrictive covenants including:
- preparing them to protect a business
- fixing poorly drafted restrictive covenants so that they are more likely to be enforceable
- pursuing legal remedies against those whose conduct and behaviour have breached the terms of restrictive covenants to obtain damages awards and injunctions to prevent repetition of
- fixing bad drafting through to enforcement of legal rights.
Speak to a solicitor about non solicitation clauses and restrictive covenants protecting a business, call +44 20 7036 9282 or email details of your case to contact@hallellis.co.uk.
Related:
- Restrictive Covenants
- Non Dealing clauses
- Non Poaching clauses
- Protection of Goodwill: Passing Off
- Protecting Confidential Information
- The Law of Passing Off: Protection of Goodwill