For Employers

Non-Solicitation and Non-Competition Clauses in Employment Agreements

Employees and employers alike are often confused about the difference between non-competition and non-solicitation clauses. While the aim of the two clauses may be similar, and although both usually deal with an employee’s responsibilities once the employment relationship has ended, the operation of the two clauses differs.

A non-solicitation clause in an agreement typically restricts or restrains an employee’s ability to contact your present clients, past clients or sometimes even prospective clients, often for the purpose of selling them a product or service, after the employee has quit or been dismissed from your employ.

A non-competition or non-compete clause, on the other hand, typically restricts an employee from engaging in employment competitive to your business after their employment with you ends, rather than being limited to specific clients. Frequently, non-competition clauses restrict such activity for a specific amount of time in a specific geographic area. The case law around the enforceability of non-competition agreements tells us that such clauses need to be reasonable not only in time, but also in geography.

If you are able to obtain evidence that the employee has breached either a non-solicitation or non-competition clause, you may be able to sue your former employee, and possibly their new employer, for damages.

If you are preparing employment agreements, it is worth considering whether a non-solicitation or non-competition clause may be appropriate, and to seek legal advice regarding your specific contract, as its wording may create unique opportunities or risks for you.

For advice on the inclusion of non-solicitation or non-competition clauses or for assistance on preparing employment contracts in general, contact us today.

This blog is produced by Waterstone Law Group LLP. This blog is intended for information purposes only and is not offered as legal advice for a specific claim. Subscription to or use of this site does not establish a solicitor – client relationship between the user and Waterstone Law Group LLP or any of the individual contributors. For advice relating to your employment law claim, please contact us to arrange for a consultation.

2 Responses to “Non-Solicitation and Non-Competition Clauses in Employment Agreements”

  • Larry Parker says:

    What if the a 50% shareholder is also an employee with no shareholder agreement and the employee shareholder wish to exit the company and start his own company in competition with his predesesor company? Can do? No can do? Can do, but restricted to what?

    • Daniel Sorensen says:

      Larry, that is a very complicated question. Shareholders can, especially if they are an officer or director, owe duties to a company, and to other shareholders within the company. Likewise, employees owe duties to their employer. Some duties of an employee to an employer can survive the end of the employment relationship. Unfortunately, there is no easy answer as it will depend upon your position of employment, the industry you’re in and the other shareholders.