Common Clause

Are Non-Solicitation clauses enforceable?

May 2, 2023

Whether non-solicitation clauses are enforceable differs by state, solicitation type, and employment status. Let’s take a look at what a non-solicitation clause is, their different treatment across states, and the parameters you should look out for when they are enforceable.

What is a Non-Solicitation clause?

Cornell Law’s Legal Information Institute defines Non-Solicitation as restricting “former employees either from soliciting clients or employees from their former employer.” In other words, your previous company doesn’t want you poaching their customers or their people. It makes complete sense from the point of view of the company protecting its own interests. However, this clause and its frequent partner, the related Non-Competition clause, have increasingly come under scrutiny in cases where it’s disproportionately harmful to the departing employee’s subsequent capacity to work in the same industry.

Differing Views by State

In general, states take a coverage-based approach to enforcing Non-Solicitation clauses. If it is too broad or too long, it’s unlikely to be enforced. For example, if you’re a company that has most of the Fortune 500 on your customer list, it’ll be difficult for a Customer Non-Solicitation to be enforceable, regardless of the state. If your old team mates choose to join your new company, such clauses also can’t be used to stop them from leaving the company, especially if it is years after you’ve left.

According to Seyfarth’s annual review looking across all 50 states, you’ll see that the vast majority of states do allow some version of Non-Solicitation clauses. However, states will have a spectrum of restrictions in place to limit its scope:

California has one of the strongest stances against Non-Solicitation enforceability, with three allowed exceptions: trade secret protection, the sale of business, and the dissolution of a partnership (Krogh & Decker does a good job of explaining the details). South Dakota, on the other hand, expressly allows for Non-Solicitation, as long as it’s no longer than 2 years.

What to look out for in Non-Solicitation clauses

Based on the above examples, it’s clear now these clauses decide who, for how long, and in what cases, you aren’t able to solicit. The first thing to be careful of is the definition of who. While standard language will use ‘employees’ and ‘customers’, we’ve seen cases of ‘vendor’ and ‘potential customer’ non-solicitation from our user’s contracts. The duration of time is often one year after departure, but there is no “favorable” period besides none at all, so it’s worth negotiating to as close to zero as possible. Finally, in cases like North Dakota and California, where non-enforceability is high, make sure that any such clause in your contract is strictly limited to the exceptions protected by law, and no broader.

Non-Solicitation clauses are one of the most frequent unfavorable, flagged clauses surfaced in our contract reviews, and often for states where it is non-enforceable and/or written in a way that is too broad to be enforceable. Unfortunately, they’re sometimes included just to receive compliance from employees without the resources to understand otherwise. It’s important to us at Ask Ginkgo that everyone understands what they’re signing, so we hope this post is one step towards realizing that goal.

For advocacy and beyond!
The Ask Ginkgo Team

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