Legal Definitions - nonsolicitation agreement

A nonsolicitation agreement is a contractual promise, often included in employment contracts or agreements for the sale of a business, where one party agrees not to try and recruit the other party's clients or employees for a specific period after their relationship ends. Its primary purpose is to protect a business from losing its valuable customer relationships and skilled workforce when an employee departs or when a business changes hands.

Here are some examples to illustrate how nonsolicitation agreements work:

• A departing financial advisor:

  Scenario: Sarah, a financial advisor, signs a nonsolicitation agreement when she joins a wealth management firm. When she later decides to leave and join a competing firm, her agreement prevents her from contacting any of the clients she served at her previous firm for two years.

  Explanation: This illustrates how the agreement restricts a former employee from trying to lure away clients, protecting the original firm's client base and revenue.

• An executive leaving a software company:

  Scenario: Mark, a senior executive at a software development company, has a nonsolicitation clause in his employment contract. After he resigns to start his own venture, this clause prevents him from reaching out to his former company's software engineers or project managers with job offers for a year.

  Explanation: Here, the agreement protects the former employer from losing its key talent to a departing executive, preventing the solicitation of employees.

• The sale of a successful bakery:

  Scenario: When Maria sells her popular bakery to a new owner, their sales agreement includes a nonsolicitation clause. This means Maria cannot open a new bakery nearby and try to convince her former bakers, decorators, or loyal customers to leave the purchased bakery and join her new business for three years.

  Explanation: This demonstrates the application of a nonsolicitation agreement in the context of a business sale, protecting both the customer base and the workforce from being poached by the previous owner.