These clauses stop your employees from being solicited or any other unnecessary competition from one of your employees. In this post, relevant information about the two types of the agreement has been discussed.
A Non-Compete Agreement
A non-compete agreement is a subsection in a contract that limits an employee from competing with their employers when the employment duration has ended. These clauses hinder employees from giving exclusive information to other competitors after and during their employment.
Generally, this kind of agreement restrains the employee from joining forces with their employers' competitors or setting up a business that will bring competition to your (ex) bosses on the same clients. Signing this agreement means you will have to abide by them during employment and after termination.
Lawful requirements for a non-compete clause
Some factors have to be considered for a non-compete agreement to be legal. The following three statements are the determining factors:
- Shield authentic business concentration of the employer
- Reinforced by consideration when signing
- It should be reasonable in time, scope, and geography
A legal consideration should reinforce a non-compete agreement; this implies that the employee will have to be given something they value in exchange for the promise to not join with the competitors.
When an employee enters into this kind of agreement before they begin employment, the employment itself will be enough to be considered for the promise not to engage in any competition.
On the hand, when the employee signs these agreements after employment, the slight promise of continued work will not be considered valid consideration for the commitment.
Therefore, in this scenario, employers will have to give the employees something that is of great value in exchange for the promise. The employer may consider promoting the employee or any other benefit not in the original employment document.
A Non-Solicitation Agreement
A non-solicitation agreement is another type of clause that controls every right of an employee in soliciting customers and fellow employees when their contract comes to an end. Usually, when the business is growing, it tries as much as possible to invest a lot in creating a suitable client base and training its employees.
Losing reliable clients and customers can be a big misfortune to the business. That is why many companies opt for the non-solicitation clause. Here an employee or business partner is restricted from exiting the firm and using the relationship they gained during their stay to acquire clients and other employees fraudulently.
Instances Where Non-Solicitation Agreement is Used
Non-solicitation agreements are standard for service or business sales; this is mostly when the client base is limited. For example, a company whose niche is in issuing spare parts and services for a luxurious model of hybrid SUB can’t just go out and get more business. Only individuals who own that specific vehicle and are local will need the company's services.
Suppose there is an unlimited client pool for the company's product. In that case, the non-solicitation agreement will be necessary if it sells anything that is not exceptional and competes basically on the price.
Today, an increasing number of employees are quitting their jobs for their own business or joining competitors who offer them huge salaries. In this case, companies have to find a way of safeguarding themselves from such scenarios. That is why they use the non-compete and non-solicitation agreements.