October 21, 2011
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Question
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Ken,
Does your employment contract, independent contractor agreement, or any other document have a non-solicitation clause in them?
Josh Timko, President
SafeNet Security
Cuyahoga Falls, OH
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Answer
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Yes, but let's make sure we understand what is meant by a non solicitation clause, because it has more than one application in the Standard Form Contracts.
By "non solicitation" in the Employment Contract and the Subcontractor Agreement, the non solicitation provision would serve to deter or prevent your employee, or your subcontractor, from soliciting your subscriber for business. A narrowly written non solicitation provision is not enough because it addresses only the solicitation by the employee or subcontractor. It may not cover the subscriber initiating the contact, and it may not cover the employee or subcontractor from actually providing any services to the subcontractor.
A broader provision would be a "restrictive covenant" for "non compete". Non compete can encompass non solicitation but much more, including communicating, soliciting and servicing. The enforcement of these provisions depends on the jurisdiction, the sensibility of the Judge, the relationship with you [the employer], with the person you are restricting [employee, subcontractor, seller], the scope in territory and duration in length of time. These criteria and more will be used to balance the need for you, the employer, to protect your business interests against the needs of the public to maintain unrestricted freedom in doing business [I am tempted to take this part out because of all of the laws and regulations that actually restrict freedom of contract, but that's for another rant and rave article] and the needs of the restricted person to earn a livelihood.
So the Standard Employment Contract does restrict the employee from competing, both while employed and for a period of time after employment has terminated.
The Subcontractor Agreements restrict the subcontractor from competing with the general contractor who hired the sub.
Most of the Standard Form Contracts also have a non solicitation provisions that prohibits the subscriber from soliciting and employing your employees directly.
The non compete provisions are not full proof; just another term in a contract that may be breached. It should have a chilling effect on someone considering breaching the provision, but ultimately the consequences will depend upon your willingness to enforce the provision against the breaching party. Often the cost of enforcement is just not worth it. Once you are determined to enforce the provision you should seek advice from a knowledgeable attorney with experience in litigation and specifically litigation involving non competition provisions. [yes my office will handle these matters - in NY and NJ]. Some states may have limits or prohibitions regarding the enforcement of non compete provisions, and that should be considered before engaging in costly litigation to enforce the contract provisions.