Vendor Non Solicitation Agreement
Vendor non solicitation agreement forbids a former employee from soliciting a former employer's vendors for another business or new employer.3 min read
Vendor non solicitation agreement forbids a former employee from soliciting his/her former employer's vendors for another business or new employer for a specific period in a given geographic area.
Nonsolicitation Agreements in Business Contracts
A nonsolicitation agreement is a contract or part of a more comprehensive document that forbids a former employee from soliciting the employees or clients of a company after departing the firm. The terms can be prepared as a standalone document or a clause within another contract such as an employment contract. Employers enter into nonsolicitation agreements with their employees to prevent departing employees from stealing essential business relations.
Difference Between a Nonsolicitation Agreement and a Noncompete Agreement
A noncompete agreement restricts an employer from working with a direct competitor or forming a business that will compete with the employer for a specific period after leaving the company within a defined geographic area. To solicit means to take deliberate action towards gaining a company or individual's business. Your employer can present you with a nonsolicitation agreement at the following periods:
- Before giving you employment.
- On the first or second day on the job.
- While in its employment.
- As a criterion for getting a promotion, raise, stock award, or bonus.
- As part of a severance agreement when you are departing the company.
What to Watch Out for in a Nonsolicitation Agreement
Check for the wording "solicit or serve" in your nonsolicitation agreement. The document puts you at a greater disadvantage if it contains the wording “I promise not to solicit or serve any of the company's customers,” or “I promise not to solicit or provide services to.”
The implication is that you will not be able to serve customers who willingly approached the new business where you now work. Many nonsolicitation agreements also forbid "direct or indirect" solicitation of customers, clients, employees, and vendors among others.
You should also understand the difference between "active" and "passive" solicitation. Furthermore, watch out for "liquidated damages." In some nonsolicitation agreements, the employer is allowed to seek refunds of specific rewards from the offending former employee. The offender could forfeit stock options or be forced to repay bonuses received during the last year of employment.
How to Enforce Nonsolicitation Clauses
Nonsolicitation clauses are enforceable if the case lacks common defenses to contract violations including:
- Forged signature.
- The agreement violates the law.
- The employer deceived you into signing the agreement.
- The employer made a promise at the time of signing the contract but did not deliver.
Types of Nonsolicitation Clauses
There are two main types of nonsolicitation clauses, including:
- Nonsolicitation clauses that prohibit you from hiring former colleagues, coworkers, or support staff at your old place of work.
- Clauses that restrict your ability to engage in business activities with the customers of your current or former employer.
Limitations Which Nonsolicitation Agreements Can Impose
Nonsolicitation agreements can restrict your rights to do business with partners, customers, vendors, suppliers, and other people or companies that have relationships with your former employer. If the document is written in a generally broad language, it can seriously impair your performance on your next job.
While most nonsolicitation agreements place restrictions on your actions after departing a company, they can also limit how you do your current job. There is also the duty of loyalty to your current employer, which is expected regardless of whether you signed any restrictive agreements with your employer.
Types of Restrictive Covenants
There are three types of restrictive covenants, namely:
- Nonsolicitation agreements
- Nondisclosure agreements
- Noncompete agreements
The three agreements above try to forbid an individual from doing something either while working for an employer or after leaving the employment of a company. These covenants must have reasonable limits regarding time, types of work, and geographical area for them to be enforceable.
Employers use nonsolicitation agreements to hold onto valuable employees. Most companies spend vast amounts of money on training their employees. To ensure they get value for their investments, employers try everything to stop employees from moving to competitor companies or prevent former employees from poaching their staff to work for competitors.
Employers also use nonsolicitation agreements to limit the ability of former employees to draw their customers and vendors away to another business, hurting the company's bottom line.
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