Building good business relationships takes a lot of time and effort, and companies know that those relationships are often the keys to their success. They certainly don’t want former employees striking out on their own (which is an increasing possibility with so many people getting bit by the entrepreneurial bug) and “poaching” their clients, customers or other key employees.
However, non-compete agreements, which generally put restraints on someone’s trade, have increasingly fallen out of favor. This is especially true since the U.S. Federal Trade Commission (FTC) has recently proposed a rule that would largely bar them in the future (and retroactively).
This means that employers may soon be looking at non-solicitation agreements as a substitute, instead – and employees or potential employees need to be aware of what they may be asked to sign. Non-solicitation agreements are still seen as largely enforceable in most states because they do not restrict someone from their trade, merely whom they may contact.
If you’re asked to sign a non-solicitation agreement
Typically, employers tuck a non-solicitation agreement in an employee’s paperwork during onboarding or ask for them when the employee leaves, as part of their severance agreement. However, there’s nothing stopping an employer from asking for one at any time, so long as they’re willing to give you something in return, like additional benefits or compensation.
What should you do if your employer hands you a non-solicitation agreement and asks you to sign it? Take a deep breath and:
- Read the contract: The number one mistake employees make when presented with a non-solicitation agreement is that they sign it without reading it or without fully understanding its ramifications.
- Be ready to negotiate: Ultimately, you want to leave yourself as much freedom to move on from that employer as you can, so don’t hesitate to negotiate for better terms regarding any geographical limitations, time lengths and the scope of what is restricted. For example, some employers try to use non-solicitation agreements to try to bar former employees from even advertising their new business. While something like that could be unenforceable, you don’t want the legal headache.
- Don’t agree to pay the company’s legal fees: Employers like to add a clause that makes the former employee responsible for the company’s legal fees if the company decides to sue over an alleged violation. That could cost you a lot, even if you win the suit.
Finally, you may want to consider obtaining legal guidance before you sign. That can help you better understand the ramifications of the agreement on your future and help you negotiate a more flexible agreement from a position of strength.