Every employer must have a hands-on guide regarding key legal, drafting, and negotiation considerations for employee and/or customer/client non-solicitation agreements/covenants. Usually, it is the duty and responsibility of employers to draft and create employee non-solicitation agreements and client/customer non-solicitation agreements through which former employees, vendors, and independent contractors, among others, are limited from interacting with an employer’s employees and clients/customers in certain ways.
By way of backdrop, we have published a dozen blog posts and created a number of videos focusing on restrictive covenants/agreements. As mentioned above and in accordance with our blog post, “Fundamental Aspects of Restrictive Covenants!,” and the video, “Restrictive Covenants Made Easy,” we highlighted that restrictive covenants are contractual devices that employers may utilize to safeguard their employee, client, and customer relationships, trade secrets, and other proprietary or confidential information, and other competitive interests. In the blog post on the video mentioned above, we said that restrictive covenants must (1) be reasonable in time, (2) be reasonable in scope, (3) not unreasonably burden the employee, (4) not be harmful to the general public, and (5) be necessary to protect the legitimate interests of the employer.
In the U.S., employee and client/customer non-solicitation agreements are treated differently in many jurisdictions. Technically, unlike non-disclosure agreements, many courts are more likely to consider employee and client/customer non-solicitation agreements valid since the latter do not hinder a former employee’s competing ability. Notably, in line with the five ingredients mentioned above, employee non-solicitation agreements are considered by most jurisdictions, including the rogue state of California, as a legitimate way for maintaining stability in businesses’ and companies’ workforces.
However, in another blog post, “Understanding Restrictive Covenants in the Life Sciences Industry,” we asserted that when it is deemed a “restraint on trade,” a restrictive covenant is considered invalid. Accordingly, because they are considered restraints of trade just like non-compete agreements, many jurisdictions will enforce employee and client/customer non-solicitation agreements if only deemed reasonable.
For these reasons, employers must address similar issues as those that would be addressed in the preparation of non-compete agreements in order to ensure that employee and client/customer non-solicitation agreements are enforceable. Most importantly, employers should proactively be aware of the justification for the restrictions being used to show a protectable interest in time and geographic restrictions, the scope of activity, and barring the recruitment of employees and/or clients/customers.
Ideally, we will begin by focusing on the key considerations every employer should factor in when drafting employee non-solicitation agreements. The three considerations that will be discussed in the next three blogs include (1) Considering Including Time, Geographic, or Other Restrictions, (2) Considering Limiting the Restraint on Employee Solicitation to a Reasonable Time Period, and (3) Avoiding Ambiguous or Overreaching Employee Non-solicitation Agreements. After that, we will shift gears and publish five more blogs that will dwell on five key considerations for every employer when drafting client/customer non-solicitation agreements. These considerations include (1) Defining Clients that will be Specifically Covered by the Non-solicitation Agreement and Determining the Scope of Prohibited Customer Solicitation, (2) Including Reasonable Geographic and Time Limits, (3) Defining Confidential Information, (4) Defining the Protectable Interest with regards to the Employer’s Confidential Information and Client/Customer Goodwill, and (5) Determining if a Geographic Restriction can be Eliminated.
Accordingly, in Part II of this new series, we shall kick-start this discussion by hammering on “Considering Including Time, Geographic, or Other Restrictions,” as one of the considerations that every employer must factor in when drafting valid employee non-solicitation agreements that would be enforceable under the law.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer & Author.