The details included in employment contracts can have a profound impact on the working relationships between businesses and employees. In some cases, the terms integrated into employment contracts may continue to influence both parties for years after the working relationship ends.
Frequently, employment contracts include restrictive covenants. Many people are familiar with nondisclosure agreements and noncompete agreements. Both of these restrictive covenants help protect businesses from workers engaging in damaging misconduct after leaving their positions.
Nonsolicitation agreements are another popular type of restrictive covenant that can potentially protect businesses and limit the future conduct of employees. What restrictions do workers accept if they sign employment contracts that include nonsolicitation agreements?
The agreement protects staff and customer relationships
Some people compete against their former employers by starting businesses or accepting jobs with competitors. Others might try to use non-public information for personal gain. They might leverage their knowledge of how one company manufactures specific products to obtain a job with a competitor.
Ambitious professionals could use the relationships that they develop while working for a business for personal gain. For example, if they start a new business after leaving the company, they might offer jobs to their coworkers, resulting in the company losing some of its best and brightest talent.
Nonsolicitation agreements protect against that possibility. They prohibit an employee from hiring their former coworkers or subordinates either directly or through a referral program with their current employer that offers an incentive to the worker.
Nonsolicitation agreements can also protect client or customer lists. Employees may become familiar with many of the biggest clients that patronize the business. They could then leverage that knowledge after leaving the company by seeking to do business with those same people or outside companies. Nonsolicitation agreements can prevent former employees from poaching the most valuable clients and customers from a company after leaving the organization.
As is the case with other types of restrictive covenants, nonsolicitation agreements often require litigation to enforce. Employers with proof that workers have violated the terms of an agreement can potentially file a civil lawsuit to enforce penalty clauses, seek an injunction to prevent future misconduct or request damages because of the harm that the breach of the agreement has caused.
Employers negotiating terms with new hires may need to consider using restrictive covenants to protect the organization. Employees who signed contracts with nonsolicitation agreements may also need to learn more about them to avoid violating the terms of an employment contract after they leave their positions.