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What are the Differences Between Non-Compete and Non-Solicitation Agreements?

Differences Between Non-Compete and Non-Solicitation Agreements

Every business owner, executive, manager, and employee has heard of or even signed a non-solicitation or non-compete agreement. These documents are common pieces of employment agreements and offer letters. Understanding the differences between these agreements and their enforceability makes achieving business goals easier.

Both of these agreements are restrictive covenants. That means each party agrees to be restricted by the terms contained in the agreement or clauses of the contract. However, just because the parties agree, does not mean a court will automatically uphold the restrictions in the document.

Non-Compete Agreements

As a business, a non-compete is often the more difficult of the two restrictive covenants to enforce. This is the case because the business has a high burden to prove unfair competition. To enforce a non-compete, the company must show that a former employee has confidential information about the business interests, and the company has restricted the employee from working for a competitor for a reasonable period of time and in a reasonable geographic area. Absent this proof by the company, enforcing a non-compete presents difficulty. Ultimately, it is up to a court to decide the reasonableness of the restrictions placed on the former employee.

That does not mean all hope is lost. In many cases, a court will modify the non-compete to be less restrictive to the former employee while still protecting legitimate business interests. An important point to note about non-compete agreements and clauses is that they should only apply to employees. Any business that attempts to use a non-compete with an independent contractor may face an audit and be subject to fines and penalties from the government for employee misclassification.

Non-Solicitation Agreements

A non-solicitation agreement restricts a former employee in a different way. They cannot solicit any existing, prospective, and sometimes former clients to come work with them at their new company. While easier to enforce than a non-compete, there are still challenges.

The biggest of these enforcement challenges is that the business must prove that a former employee solicited an existing, prospective, or former client to leave. Businesses are not often aware of the specific reason why a client leaves, making enforcement difficult but not impossible.

Possible Clauses

To help businesses understand the distinction between these restrictive covenants, there are key pieces that may help a company enforce these clauses. The exact needs of every business will vary. For that reason, and to have a complete understanding and review of a company’s restrictive covenants, it is advisable to speak with a skilled business lawyer.

For non-compete terms::

  • Restrict the former employee to working in a similar position with a client or competitor.
  • Only restrict the former employee within a geographic area around the company’s office.
  • Lift restrictions after a reasonable period of time, such as two years.

For non-solicitation terms:

  • Restrict the former employee from soliciting existing and potential clients and current employees.
  • Limit the restriction to no more than two years.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Clients with Non-Compete and Non-Solicit Agreements

If your business is facing non-compliance from current or former employees, or if you want to understand whether your restrictive covenants are enforceable, we can help. Your business is important to you, and you need guidance you can trust. The Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. can help you with your business needs. Contact us online or call us at 215-574-0600 for an initial consultation. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.