Non-solicitation and non-compete clauses are both common provisions that employers incorporate into employment agreements. While the two may have similarities, they are quite different provisions that accomplish separate goals. Note, too, that in 2019, Washington state revised its non-compete laws. This means that if your employment contracts include a non-solicitation and/or a non-compete clause, now might be a good time to review them to ensure they comply with Washington’s employment laws.
What is a Non-Solicitation Provision?
A non-solicitation clause is a provision in many employment agreements between an employer and an employee. The clause essentially prohibits the employee from solicitating the employer’s clients. These provisions are usually used by sales or service-related businesses since the income of these companies is tied to the relationships they have built with their clients.
The following points are usually included within a general non-solicitation clause:
- The employee must not divulge the name of any client to any party outside the company,
- The employee must not solicit or contact a company’s clients without the company’s written permission,
- The employee must not do anything that could interfere with the relationship between the company and its clients (for example, discuss the company’s current financial state), and
- The penalties if an employee violates the requirements within the provision.
Note that non-solicitation clauses are generally legal and enforceable if they are used for a valid reason. Examples of a valid reason are:
- The company has a client list that has a monetary value, and
- The company’s client list is worth protecting (for example, because it is custom built).
Non-solicitation clauses can also cover solicitation of employees and are often included in these provisions.
- The employee may not solicit or attempt to solicit current employees or other personnel of the company.
- The employee may not to anything to interfere with the Company’s relationship with hits employees or other personnel.
What is a Non-Compete Provision?
As with non-solicitation clauses, non-compete provisions are commonplace in many of today’s employment agreements. A non-compete clause basically prevents a former employee from working for another company in the same industry. The provisions restrict workers from acquiring job skills with one employer and then using them to the potential benefit of a competitor.
Washington State revised its non-compete laws in 2019. Under current law, a non-compete clause is valid between an employer and employee provided that:
- The employee earns more than $100,000 per year,
- The employer discloses all the terms of the clause during or before making an offer to the employee (or provides additional compensation if the employee is already employed with the company),
- The employer compensates employees that are laid off for the duration of the time when the employees are still subject to the non-compete provision, and
- The clause does not cover a period of time longer than 18 months.
Note that if an employer wishes to enter into a non-compete agreement with an independent contractor, the agreement is only valid if the contractor earns $250,000 or more per year from the employer.
Can the Two Provisions Work Together?
They can. Non-solicitation clauses are usually incorporated into non-compete clauses. Further, if an employee or contractor makes less than the minimum salary for a non-compete, an employer can still have the party sign a non-solicitation agreement. Granted, non-solicitation clauses are not as restrictive as a non-compete clause, but a non-compete can still help ease a company’s concerns.
Do I need both provisions?
At the end of the day we find that may of our client are in need of a non-solicitation clause as often times they are looking to protect their client lists, and their employees from being poached. They are not necessarily trying to keep folks from earning a living even if in the same industry. To see where you might fall in the spectrum of options or what is best for your business and the culture you are creating contact us for a consult.
How can I enforce my position?
This is a loaded question and comes with a typical ‘it depends’ answer because it really does on the facts and circumstances of the issues. Companies are entitled to enforcement within the realms of the law. That being said companies often see these clauses as deterrents to prohibit this activity.
The attorneys at Foundry Law Group have years of experience in helping businesses comply with state employment laws and policies. Our team follows the latest developments affecting our clients’ operations, and we apply that knowledge as we build proactive strategies for long-term protection. We are always here to help so make sure to contact our talented team now!