Non-Solicitation Clauses Protect Valuable Intangible Assets
Every company has different types of assets. These may include tangible items, such as inventory and fixtures, or intangible assets and intellectual property, such as patents and trade secrets. One of the most valuable assets of any business is likely to be its relationships. These may be relationships with highly-specialized employees, relationships with unique vendors and suppliers, or relationships with long-time customers. Each of these relationships took time, energy, and money to develop and strengthen. So, when entering into agreement with someone new, it may be wise to include a provision that protects those essential existing relationships.
Let’s say that you decide to hire an advertising agency to come up with a new campaign for your business. To assist in implementing their recommendations, you introduce them to an employee who oversees your business’s website. While working with this employee, the advertising agency may decide that she is fantastic, and she could be a huge benefit to their own business. So, they make her a generous offer to leave you to come work for them. Assuming she is not bound by a non-competition provision in her employment contract with you (a topic of discussion for another day), she is free to leave, and you will have lost a valued employee. This scenario could also occur with your vendors or worse, your clients.
Fortunately, if you drafted your contract with the advertising agency wisely, the advertising agency would be bound by a non-solicitation clause that would prevent them from doing this. A “non-solicitation clause” may take a number of different forms, but essentially, it is designed to protect third parties from interfering with your valued relationships. When working with someone new, you may be introducing them to your employees, manufacturers, suppliers, or clients. In introducing these parties, you run the risk that they may hit it off and come up with a way to work together WITHOUT you and your business in the middle. However, if bound by a non-solicitation clause, the third party would be prohibited from “soliciting” your employees, vendors, or clients during your time working together and for a certain period afterward, often about a year. Such a provision would allow you to work with new parties without fear that they will damage your valued relationships.
If you are contemplating working with someone new and want to know how or whether to include a non-solicitation clause in the related agreement, we would be happy to help.