What’s a non-solicitation agreement?
Understanding Non-Solicitation Agreements in Florida
As the name implies, a non-solicitation agreement seeks to limit the target’s ability to solicit business from the company’s customers or solicit employees from the company’s staff. No special language need be included in any document for a non-solicitation agreement to come into existence . In many instances, customer non-solicitation agreements are simply drafted as non-compete covenants where the non-compete covenant is not enforced by the employer, either because the non-compete is ineffective or the employer is simply electing to enforce only the non-solicit. Employee non-solicit agreements are usually contained within an employment contract between the employer and employee.
Common clauses in Florida non-solicitation agreements
Florida non-solicitation agreements typically contain two clauses which restrict the receiving party from "poaching" or soliciting employees or clients away from the party who crafted the agreement. Non-solicitation provisions may restrict the receiving party from soliciting employees and clients only for a period of time subsequent to termination, or can include a restriction on non-poaching employees or clients during the life of the contract. A well-drafted non-solicitation clause will define the scope, duration, and geographic limitations of these restrictions and should be able to stand independently from any other contractual provision such as non-compete or one that is less restrictive than a corresponding non-compete.
The courts in Florida are typically lenient when it comes to the duration of these types of clauses in employment agreements. It is common practice in Florida to see a non-solicitation provision that restricts the solicitation of employees or clients for;
Florida courts have traditionally allowed the parties to bind one another to a reasonable amount of time, even at the risk of non-enforcement; however, it is recommended that employers include the smallest interval in their contracts that will still be able to withstand review from the court.
Enforceability under Florida law
Florida follows the common law rule that post-employment restrictive covenants are only enforceable to the extent that they are necessary to protect an employer’s legitimate business interests and are reasonably restricted in terms of time and area. However, Florida Statutes §542.335 now governs non-competition agreements. As a result, if a non-solicitation agreement is part of a non-competition agreement, the statutory requirements apply. If the non-solicitation agreement is standalone, rather than part of a non-competition agreement, Florida courts will review the agreement under the common law standard as set forth above. The statute requires such agreements to be based on a legitimate business interest of the employer, and it protects the employer from direct, indirect, and threatened actions by the employee, or any person acting in concert with them.
Employer benefits of non-solicitation agreements
The requirement for non-solicitation agreements is common when employers are hiring employees who may be placed in a position where they will be privy to sensitive information or relationships. Non-solicitation agreements can help employers protect their business interests and maintain a competitive advantage in the marketplace. A non-solicitation agreement is an important tool for safeguarding against unfair competition. It restricts or prohibits an employee from interacting with or otherwise attempting to solicit current or past customers of the former employer or the new employer for whom the employee may be working. As there is no legal requirement that the employer pay for a non-solicitation agreement (as opposed to a non-compete, which must be supported by independent consideration), typically the only consideration is the fact that the employee has received or been offered employment. For example, a common non-solicitation agreement is one prohibiting an employee from contacting (or soliciting) clients of his or her former employer for a specified period of time after departure. However, if that employee is hired by a different company after his or her departure, the non-solicitation agreement may or may not apply. It depends on the specific terms of the agreement. If the agreement is silent regarding whether it applies to post-employment activity with a different company, the former employer could possibly have a difficult time enforcing it. An employer may choose to simply require a non-solicitation agreement covering post-employment activity in addition to its other restrictive covenants.
Potential issues and employee rights
Employees may face various challenges when it comes to non-solicitation agreements. Some of the most common are: employees who find themselves subject to a non-solicitation agreement should understand their rights, and what protections the law affords them.
First, employees may feel that the scope of their non-solicitation agreement is too broad. For example, if an employee leaves his employer to work for a competitor and is then sued by his former employer for violating a non-solicitation agreement that includes a broad range of employees in its scope, he may challenge the agreement as being overly broad or unreasonable under Florida law. Florida courts are not likely to uphold any contract or provision of a contract that limits an employee’s ability to earn a living unless such limitations are justifiable (i.e., protect a legitimate business interest) and reasonable in terms of duration, territorial limit, and the scope of the prohibited activity.
In the alternative, an employee may feel that after a non-solicitation agreement was formed, the employer later took some action that invalidated the agreement . Again, this argument may be successful. An employer who fails to uphold their part of the bargain behind the employment agreement, if one exists, may not be able to subsequently enforce a clause such as non-solicitation against an employee. Thus, even the smallest of employer actions may pose a challenge to enforcement, if an employee is later sued.
Additionally, a non-solicitation agreement may sound extremely limiting to the employee. In many instances, a non-solicitation agreement may seem overreaching. Also, because the non-solicitation agreement restricts the employee with respect to all of the relevant key constituencies, even employees of vendors could not be contacted by the employee about job opportunities. However, in practice it is not so clear that the employee’s actions violated the non-solicitation agreement. It is important for the employee to note that even if his new employer is contacting customers, it may be that the new employer is the one violating the employee’s restrictive covenant agreement.
How to draft non-solicitation agreements
Effective non-solicitation agreements for employees in Florida
To maximize their enforceability, agreements not to solicit customers or employees should have very specific and clearly-worded language. This will help reduce the chance that an employee will argue that the agreement in clouded in ambiguity. Such an argument would be an easy way to try and get out of the agreement. First, identify and fully describe the customer that is being protected in the agreement. For example, specify what type of customers are being protected: Then, be clear as to what activities will be prohibited with regard to those customers. For example: Also, be clear as to who is a competitor, as well as the nature of the non-competition restriction. For example: Similarly, be clear as to what sort of services are being restricted from being provided to a competitor: Be specific about what employees are being protected. For example: And, eliminate any language that suggests that the agreement applies to anyone other than the party to it. This suggestion probably means nothing, but it can be interpreted as something more by the Florida Department of Revenue in some cases. Finally, do not attempt to retroactively prevent solicitation of customers or former employees, unless that restriction has already been agreed to. If an employee terminates an employment relationship and then becomes a competitor, an agreement not to solicit that employee’s former co-workers or customers, entered into after the employment ended, cannot be enforced. Greene v. Gulfstream Trade Ltd., 607 So. 2d 421, 423 (Fla. 3d DCA 1992). A little effort in drafting the non-solicitation agreement carefully will have future payoffs in the form of having a clearly drafted agreement when a dispute arises over its effect.
Alternatives to non-solicitation agreements
Non-solicitation agreements are not the only restrictive covenants that an employer may attempt to use to retain its employees or limit competition from past employees. As indicated above, courts do not like to enforce non-solicitation clauses, which might be an argument that you should consider drafting them, because Florida law may allow you to enforce clauses that attempt to limit or restrict the ability of your employees to solicit or do business with clients without having to resort to other means of monitoring client relationships.
Alternatively, you may wish to consider the use of "non-compete" clauses, which may allow you to more properly protect your business and your employees. Non-compete clauses can restrict the ability of your employees to commence or engage in any activities which are competitive with your business upon the termination of employment for a specified period of time. For example, instead of attempting to set up a non-solicitation clause , you may want to use a non-compete clause which prevents the employee, for a specified period of time, from working in the area of the business in which the existing employer is engaged.
However, courts will not allow you to prevent an employee from earning a living simply because the employee has been terminated. Many times, your best action is to simply draft the non-compete clauses to limit the duration of the restriction – perhaps a period equal to the amount of time in which the business would be negatively impacted by the employee competing.
You also may wish to use confidentiality agreements, which are enforceable pursuant to Florida’s Uniform Trade Secrets Act. The trade secret legislation allows your business to obtain an injunction against persons who improperly obtain and disclose trade secrets.
For example, your client lists may be considered trade secrets. If so, you can prevent your employees from using these trade secrets for a period of time following their employment.