20 Feb Understanding No Hire/Non-Solicitation Agreements
A company has two key assets – its employees and its customers. Non-solicitation and no-hire agreements are designed to protect them both so you don’t lose your best workers or your most lucrative clients, which could not only cause you to lose money, it could ultimately put you out of business.
What are the benefits of these types of agreements?
To better understand what a no-hire or non-solicitation agreement is, consider this scenario: If you hire a star creative director who not only begins working with your best clients, but also brings new clients to your business on the basis of his or her creative skills, you as an agency owner will want to protect your interests if that creative director decides to leave, and a non-solicitation agreement is one way to attempt to do that. A type of business contract, a non-solicitation agreement is a way to keep the clients who have become part of our business roster from moving on to a rival company if your creative director decides to leave.
A non-solicitation agreement can also be used at the beginning of a business venture to prevent an employee – for example, a hair stylist who soon brings a slew of new clients to your salon – from taking those clients with them if they leave. A non-solicitation agreement can be requested at the start of employment or when a business relationship comes to an end. In California, language must be tight and the agreement must be reasonable in nature to be seen as legally binding. Because of that, no-hire agreements are difficult to enforce in California.
A non-solicitation agreement will also prevent an employee from attempting to poach long-time clients or staff, which is what happened in the movie Jerry Maguire when Tom Cruise’s character encouraged his co-worker, played by Renee Zellweger, to leave with him when he rashly decided to start his own business. If either had signed a non-solicitation agreement, the action could have led to a breach of contract lawsuit against them and their new business.
Differences between no-hire and non-solicitation agreements
No-hire and no-solicitation agreements are similar, although no-hire agreements are also sometimes made between businesses so that competing businesses can’t hire another’s employees. In most cases, there is a time limit on such agreements and they cannot be enforced after that time has passed.
Are you considering a no-hire or non-solicitation agreement?
Because these agreements are difficult to enforce in California, it’s important to have an experienced attorney to help you craft a document that protects your company. For more information, contact Fernald & Zaffos in Los Angeles at 323-410-0300 or Las Vegas at 702-410-7500.