Non-Competition and Non-Solicitation Clauses 101
By Daniel Sorensen and Lawrence Smith
Non-competition and non-solicitation clauses are useful tools that employers can use to protect their business. Unfortunately, many employers are unfamiliar with these clauses, and it is not unusual for employers to get the two mixed up.
So what is a non-competition clause? A non-competition clause restricts an employee during their employment and after their employment ceases from engaging in employment competitive to the business of their current or previous employer. Usually, non-competition clauses restrict competition for a specific amount of time in a specific geographical area. Courts have established that in order for a non-competition clause to be enforced, its restrictions must be reasonable on the employee, and the intentions of the clause must be absolutely clear. When an employee breaches a non-competition clause, the employer may be able to sue both the employee breaching the clause, and the employee’s new employer.
So then what is a non-solicitation clause? A non-solicitation clause prevents an employee from contacting or doing business with present, past, or sometimes even prospective clients of the employer. Such a clause will usually prohibit an employee from contacting these clients for the purpose of selling them a product or service after the employment has ended. Like a non-competition clause, when an employee breaches a non-solicitation clause, the employer may be able to sue both the employee and any new employer of the employee.
Employers should not be afraid to use non-competition and non-solicitation clauses, but employers should be careful about how such clauses are worded. It is worthwhile for employers to seek out legal advice when implementing such clauses. If such clauses are worded incorrectly, they’ll be ineffective or unenforceable.
For advice on the use of non-solicitation or non-competition clauses or for assistance on preparing employment contracts, contact us today.