What is a Non-Solicitation Agreement?
A non-solicitation agreement (NSA) is a restrictive covenant utilized by businesses to prevent former employees from grabbing up their most valued customers. Non-solicitation agreements prohibit a recently fired or departing employee from contacting your customer base or attempting to poach your other employees in favor of their new place of employment. For example, an attorney working at a firm may quit one day, but with this agreement in place, he would be unable to bring that old firm’s clients with him to his new practice.
This clause can be a valuable tool for ensuring that your customer base stays with you and your company for years to come. It is also helpful for building and investing time into your workers because you know that an influential former member of your team cannot sweep them off their feet at the earliest opportunity.
Not every business or industry will benefit from non-solicitation agreements the same as the others. They are especially useful if the nature of your business could be started from nothing as long as it has the right client list – which is to say, you’re preventing your employees from going off and starting a competitor brand by stealing your client base.
In order to ensure that your non-solicitation agreement is enforceable, it is highly recommended that you work with experienced employment law attorneys. A poorly constructed restrictive covenant could end up costing you time and money, not to mention cost you a lot of goodwill. Contact our law firm to discuss your business goals, and we can help you determine whether a non-solicitation agreement is suitable for you.
How Do Non-Solicitation Agreements Differ from Non-Compete Clauses?
Though similar in that they are both a form of a restrictive covenant, non-compete agreements and non-solicitation agreements are two very different things.
A non-solicitation agreement is an employment contract that prevents a former employee from soliciting and ‘poaching’ clients, customers, vendors, suppliers, employees, and executives from their former place of work.
A non-compete agreement (NCA) is an employment contract that requires a former employee not to work for a direct competitor for a certain amount of time after their employment ends with a company.
There are other types of restrictive covenants, too, including non-disclosure agreements and anti-raiding agreements. Each business is unique. To learn more about what kind of employment contracts would suit your needs, please contact our Deerfield-based law offices to schedule a case review.
How Do Newly Amended Laws Limit the Effectiveness of Non-Solicitation Agreements?
Non-solicitation agreements are subject to state law, not federal law. There were already several requirements and restrictions in place, but the newly introduced Illinois Freedom to Work Act (IFWA) grants more rights to the workers and adds more rules to the employer when working with a ‘covenant not to solicit.’
Requirements and restrictions of non-solicitation agreements include the following:
- A non-solicitation agreement is void unless the employee receives valid employment, is of genuine purpose for the business to succeed, does not impose undue hardship on an employee, does not impose hardship on the public, and the employee receives adequate notice and consideration,
- Certain union employees are not required to sign a non-solicitation agreement.
- Employees who work in the construction business cannot be required to sign non-solicitation agreements.
- Employers must advise employees of their right to consult with an attorney before signing a restrictive covenant work contract. They must be given two weeks to review the agreement and decide whether or not they will sign. In many cases, a potential employee will expect something in return for signing the employment agreement, such as guaranteed employment for a certain number of years or other work benefits. It is vital that the contract not be seen as something inherently negative by the workers.
- Non-compete agreements are only valid if employees make over $75,000 a year. In 2027, that number will increase, and it’ll go up every five years after that, too.
- The non-solicitation agreement may not be enforceable if the employee was laid off for reasons related to the COVID-19 pandemic.
What is the Legitimate Business Test?
A non-solicitation agreement is only enforceable if it meets the criteria of a five-part legitimate business test.
The restrictive covenant is null and void if it does not meet these five requirements:
- The employee receives adequate consideration.
- The restrictive covenant is necessary for a valid employment/employer relationship.
- The restrictive covenant only applies to the essential means for protecting the employer.
- The restrictive covenant does not impose hardship on the employee.
- The restrictive covenant is not ‘injurious’ to the public.
If the covenant is written in such a way that it meets these requirements under the IFWA, then the employment contract may be enforceable.
Contact Us Today for a Case Evaluation
A restrictive covenant of any sort has its pros and cons. Many are written poorly, meaning that an employee’s lawyers may be able to pick them apart and render them unenforceable. To ensure that your employee contracts meet the requirements of the law and are enforceable, we recommend contacting our law firm to work with our employment law attorneys.
The S.T. Legal Group proudly serves employers and employees alike across the state of Illinois. Our legal team has extensive experience in employment law matters, including non-solicitation clauses. To learn more about the legal services we offer, please contact our Deerfield-based law offices to schedule your initial consultation. 847.654.9200.