Non-solicitation, in
contract law
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more Party (law), parties. A contract typically involves consent to transfer of goods, Service (economics), services, money, or pr ...
, refers to an agreement, typically between an employer and employee, that prohibits an employee from utilizing the company's clients, customers and contact lists for personal gain upon leaving the company.
Non-solicitation agreements
Non-solicitation agreement provisions—alongside the
non-compete clause
In contract law, a non-compete clause (often NCC), restrictive covenant, or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition again ...
(NCC) and the
non-disclosure agreement
A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract or part of a contract between at le ...
(NDA)—constitute one of three
restrictive covenants
A covenant, in its most general and historical sense, is a solemn promise to engage in or refrain from a specified action. Under historical English common law, a covenant was distinguished from an ordinary contract by the presence of a seal. Be ...
frequently found within a business contract. They may be entered into with both employees and independent contractors—in addition to multiple entities—as part of a larger general contract or as a standalone provision.
Restrictions
Non-solicitation agreements are restricted by convention, jurisdiction, and terms of scope. Furthermore, enforceability has proven difficult and, in certain instances, has been deemed "very subjective".
Restraint of Trade
A non-solicitation agreement that is too widely construed may violate standards of "reasonableness" (decided on a case-by-case basis). Under
common law
Common law (also known as judicial precedent, judge-made law, or case law) is the body of law primarily developed through judicial decisions rather than statutes. Although common law may incorporate certain statutes, it is largely based on prece ...
, an overreaching agreement would be deemed a
restraint of trade
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of '' Mitchel v Reynolds'' (1711) Lord S ...
and thus be deemed invalid.
Jurisdictional variations
Non-solicitation agreements are restricted in certain jurisdictions, notably
California
California () is a U.S. state, state in the Western United States that lies on the West Coast of the United States, Pacific Coast. It borders Oregon to the north, Nevada and Arizona to the east, and shares Mexico–United States border, an ...
, which prohibits such agreements for all circumstances other than the protection of company
trade secret
A trade secret is a form of intellectual property (IP) comprising confidential information that is not generally known or readily ascertainable, derives economic value from its secrecy, and is protected by reasonable efforts to maintain its conf ...
s in all but several exceptions, a decision upheld by the
State Supreme Court
In the United States, a state supreme court (known by other names in some states) is the highest court in the state judiciary of a U.S. state. On matters of state law, the judgment of a state supreme court is considered final and binding in ...
in 2008.
In Canada, non-solicitation agreements came under restrictive scrutiny in 2016, when the
Alberta Court of Queen's Bench
The Court of King's Bench of Alberta (abbreviated in legal citation, citations as ABKB or Alta. K.B.) is the superior court, superior trial court of the Canadian province of Alberta. During the reign of Elizabeth II, it was named Court of Queen's ...
considered the issue in ''Specialized Property Evaluation Control Services Ltd. V. Les Evaluations Marc Bourret Appraisals Inc.'' The court found that
wrongfully dismissed employees are excused from enforceability both of non-solicitation and non-compete agreements, in addition to finding both agreements unenforceable unless they are reasonable and in the public interest.
In the United Kingdom, in the case of Safetynet Security Ltd. v Leonard Coppage and Freedom Security Solutions Ltd., the court held that an employment contract clause preventing an individual from contacting any former customers for six months after leaving the company "had clearly been agreed to by him throughout his contract and was reasonable and enforceable".
[Property Litigation Association]
Safetynet Security Limited v Leonard Coppage & Freedom Security Solutions Limited
published August 2012, accessed 20 May 2021
References
{{reflist
Contract law