Staying On The Right Side Of The Law

Beware Of Nonsolicitation Agreements In Your Contract

When you are working for a company and you are considering starting your own business as well, you may find it useful that you have already established so many business contacts. However, you should think twice if you have signed a nonsolicitation agreement. At any point in your relationship with your employer, you might be asked to sign such an agreement. 

​Why a Nonsolicitation Agreement?

Nonsolicitation agreements are common in markets where there is a limited pool of customers. If an ex-employee manages to solicit customers from their old company, this could be devastating because there may be no way to replace these customers.

Nonsolicitation agreements may also apply to the solicitation of employees. While you are free to leave your company personally, you may be prevented from soliciting other employees to start working for your new business. Employee training is time-consuming and expensive. It may take years before an employee brings a return on investment. 

Direct Vs. Indirect Solicitation

Solicitation of fellow coworkers can be considered direct or indirect. A direct solicitation simply refers to when an employee leaves a company and attempts to take an employee with him or her by explicitly making a job offer. Indirect solicitation can be more difficult to prove. 

For example, you may have one of your coworkers at a new firm solicit a coworker from your ex-firm. Informing your coworkers about a new company through an email is another example. You may even get in trouble if you advertise your new position in a publication that you know your fellow coworkers will read.

Independent Contractors Aren't Immune

Even if you are an independent contractor, you may be prevented from soliciting work from customers whom you interact with. For this reason, when you are entering into an agreement with a business, you must look over the contract carefully and you should also consider consulting with a lawyer before agreeing to sign a contract.

Fortunately, in extreme cases, you may be able to have an unreasonable nonsolicitation case thrown out if the agreement simply leads to what is known as a "restraint of trade." Whether or not you'll win is based on the state you live in. Some states have very restrictive laws on the type of nonsolicitation agreements your employer can require you to sign. But you will want to work with a lawyer who has extensive experience with these type of cases.

Get in touch with a firm like The Fernandez Law Firm, a Business and Technology Law Firm for more information.