Employee Non-Solicitation Agreement

Employee Non-Solicitation Agreement: what it is

An Employee Non-Solicitation Agreement is a contract in which an employee promises that, for a set number of months after leaving, they will not approach the company's clients they dealt with or persuade the company's staff to leave. It is narrower than a non-compete because it does not stop the person working for a rival.

When you need this document

• A sales, account management or consulting employee has built close relationships with clients the company wants to protect.
• A company is worried about a departing manager taking their team along to a competitor.
• An employer is putting in place written protections for staff who handle key client accounts.
• A business wants a restriction that is more likely to be respected than a full non-compete.

What it covers

• The names of the Company and the Employee and the date of execution.
• A promise not to solicit any client of the Company with whom the Employee had material contact during employment.
• A promise not to solicit or induce any Company employee to leave their employment.
• The restriction period, stated in months after the Employee leaves, applying to both promises.
• An agreement by both parties that the restriction is reasonable and necessary to protect the Company's legitimate business interests.

How to fill, sign and use it

1. 1Fill in the company name, employee name, restriction period and date in the form on this page and check the preview.
2. 2Keep the period short and tied to a genuine need, and consider listing the client accounts the employee handled in a separate annexure.
3. 3Have an advocate review it before signing, because courts in India have taken differing views on whether non-solicitation clauses fall within the bar on restraint of trade in section 27 of the Contract Act.
4. 4Execute it on stamp paper of the value required in your state, as stamp duty on agreements varies by state.
5. 5Have the company's authorised signatory and the Employee sign and date it, and give the Employee a copy.
6. 6Keep the original with the appointment letter and confidentiality agreement in the personnel file.

Documents to attach or keep with it

• Appointment letter or employment contract
• Confidentiality or non-disclosure agreement
• List of client accounts handled by the employee, if annexed
• Authority letter for the company signatory

The law behind it

The Indian Contract Act 1872 governs this agreement. Section 27 makes agreements in restraint of a lawful trade or profession void. Indian courts have not been uniform on non-solicitation clauses: some have enforced a reasonable restriction on actively approaching clients or poaching staff, while others have treated it as a restraint and refused relief, especially where clients approached the former employee themselves. Clauses aimed at protecting confidential client data tend to stand on firmer ground. The wording and facts matter a great deal.

Common mistakes to avoid

• Drafting the clause so it covers every client of the company, including those the employee never dealt with.
• Treating a client who independently approaches the former employee as solicitation by the employee.
• Setting a very long restriction period with no business reason, which makes the clause easier to attack.
• Not keeping records of which clients the employee handled, making breach hard to prove later.

Employee Non-Solicitation Agreement: frequently asked questions