Non-Solicitation

A non-solicitation clause prevents one party from actively recruiting the other party’s employees, or poaching its customers, during the contract and for a period afterwards.

What it does

When two companies work closely, each gets to know the other’s people and clients. A supplier’s consultant spends months on site and the customer wants to hire them. A reseller learns who the supplier’s best customers are and approaches them directly. A non-solicitation clause aims to stop this.

The employee version prohibits soliciting, and sometimes hiring, the other party’s staff who were involved in the contract. The customer version prohibits approaching the other party’s clients for competing business. Both are usually limited to a period, commonly six to twelve months after the contract ends, and to people or customers the restricted party had contact with under the contract.

The clause is a restraint on competition, and most legal systems scrutinise such restraints. A clause that is wider than necessary to protect a legitimate interest may be unenforceable in whole or in part. Agreements between companies not to hire each other’s staff have also attracted competition law attention in several jurisdictions. Both points are jurisdiction-dependent.

Example wording

During the Term and for twelve (12) months afterwards, neither party shall, directly or indirectly, solicit or entice away from the other party any employee who was materially involved in the performance of this Agreement, without the other party’s prior written consent. This clause does not prohibit general recruitment advertising not specifically targeted at such employees, or the hiring of any person who responds to such advertising.

Risks for SMBs

Losing your key person to the customer. For a small consultancy, one senior consultant may be the business. A large customer that hires them after a project takes the asset and leaves the SMB with the overhead. Without a non-solicitation clause, there is usually nothing to stop this.

“No hire” versus “no solicit.” A no-solicit clause stops active recruitment. A no-hire clause stops employment even if the person applied unprompted. No-hire is much more restrictive, harder to enforce, and may interfere with the individual’s right to work. Understand which one you are agreeing to.

Unenforceable because too wide. A clause covering all employees of the other party’s group, worldwide, for three years, may be struck down entirely rather than reduced. A narrow, well-targeted clause is more likely to hold.

Customer non-solicitation in reseller deals. An SMB reseller or agency bound not to approach the supplier’s customers may find its own client base restricted if the supplier’s customer list overlaps with the market. Define the protected customers precisely.

Damages are hard to prove. Even with a valid clause, quantifying the loss from a departed employee or customer is difficult. Some contracts include an agreed sum, such as a recruitment fee, payable on breach. Whether such a sum is enforceable depends on jurisdiction.

Common variants and negotiation points

• Mutual obligations. Ask for the clause to apply both ways. A customer that wants to protect its staff should accept the same restriction.
• Scope of employees. Limit the restriction to staff materially involved in the contract, rather than all employees, and exclude junior or administrative roles.
• Duration. Six to twelve months after termination is a common middle ground. Longer periods are harder to justify.
• General advertising carve-out. Exclude hires resulting from public job advertisements and unsolicited applications, so the clause targets active poaching only.
• Agreed fee instead of prohibition. Some parties prefer a placement fee (a percentage of first-year salary) payable if the other side hires their staff, instead of a prohibition. This is more predictable and often easier to enforce.

Related clauses

• Confidentiality: protects the customer and staff information that makes solicitation possible.
• Exclusivity: a broader restraint on dealing with competitors.
• Survival: non-solicitation must be listed as surviving termination to work after the contract ends.
• Subcontracting: freelancers and subcontractors are often left out of the definition of staff.

This page is general information about a common contract clause. It is not legal advice and does not account for your jurisdiction, industry, or the specific contract in front of you. Talk to a qualified lawyer before relying on it.

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