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How can a nonsolicitation agreement protect your business?

| Feb 9, 2021 | Business Law |

Many Massachusetts businesses require top-level employees to sign a nonsolicitation agreement. New owners of a company may also require the seller to sign this restrictive contract.

In both cases, the agreement is designed to prevent employees and sellers from wooing customers and valued workers away from the company. A nonsolicitation clause can be one part of an employment or purchase contract or a separate document.

Enforcing a nonsolicitation agreement

Like noncompete and nondisclosure agreements, nonsolicitation clauses are restrictive covenants attempting to keep someone from taking certain actions detrimental to your business. For them to be enforceable, they typically must include:

  • Reasonable scope: The contract must specify how long the agreement remains in effect and the geographical area it includes. Both must be “reasonable” as deemed by a court as many judges protect a person’s right to earn a living in their field of expertise.
  • Consideration: The employee signing the agreement must receive something in return, which can include being hired, a promotion, an increase in pay or other perks and benefits.
  • Employee acceptance: The worker must consent that they won’t violate the agreement’s provisions for a certain period of time for their own benefit or anyone else.

Types of restricted activities

During the time an agreement is in effect, they generally include the following restrictions:

  • The seller can’t continue to do business with the company’s customers or try to attract prospective customers
  • Former owners or current/former employees can’t recruit employees
  • For a specified period, they cannot hire or attempt to hire current employees

Noncompetes vs. nonsolicitation agreements

Some businesses require both nonsolicitation and noncompete agreements. Noncompetes are more general, but it is illegal in Massachusetts to require certain professionals to sign these agreements. Nonsolicitation arrangements are more specific, aimed at keeping someone from taking customers or hiring away workers.

Disputes can be tricky, especially over the issue of direct or indirect solicitation. Did the party in question directly contact a worker or did the worker become aware of the position through a third party? In a 2012 Massachusetts case, a court said no violation of a nonsolicitation agreement occurred when a worker joined a competitor after learning of the opening on Facebook.

In many cases, these agreements are only tested when they go before a judge. That’s why it’s crucial to work with a business law attorney who understands Massachusetts’ laws when constructing these agreements or when litigation is necessary.