What is Non Solicitation Agreement?

The dictionary definition of the term solicitation means ‘the act of asking for or trying to obtain something from someone’. When looked at practically, the usage of this term is mostly in the business economy, especially today when the competition is thriving. Non solicitation agreement comes into the picture when two parties agree to not solicit any sort of resources from the other. The concept of entering into a non solicitation agreement is pretty logical in today’s competitive environment. Yet, there are a lot of legal implications related to entering into a third-party or employee non solicitation agreement. You can get your Non Solicitation Agreement draft through an online legal drafting services provider. However, before that, you can get a detailed idea of non solicitation agreement, its meaning, scope, features, and validity through this article.

The meaning of non solicitation agreement

Non solicitation agreement is a legal agreement between two parties, where they restrict each other from soliciting the resources of the other party. These resources can include employees, data, vendors, suppliers, or any other such business contacts. The most popular use of the non solicitation is in clauses of employment contract. However, with the surge of competition, increase in business relationships, etc. the need for separate non solicitation agreements is increasing. Now that we have a clear idea of the non solicitation agreement meaning, let’s understand its scope. 

Who are the parties to a non solicitation agreement?

As stated above, the primary use of non solicitation agreement was between an employer and an employee. However, now any of the following can be parties to a non solicitation agreement: 

Employer and employee non solicitation agreement

Employers make new employees sign non solicitation agreements while joining their organization to ensure that during employment, and after the termination of employment, the employee will refrain from using the employers’ contacts to compete with the employer’s business. 

Non solicitation agreement between two competing entities

This concept was more popular in international jurisdictions until now. However, it has gained popularity in India with the booming economy. Nowadays, two businesses having the same business activities divide the market and scope by entering into non solicitation agreements. Here, the parties enter into a mutual agreement to not solicit or even try to approach any of the other party’s employees, contractors, vendors, service providers, client database, etc. 

Service Level Agreement and non solicitation

A Service Level Agreement comes into the picture when a business or individual hires a service provider for a specified temporary period. The main purpose of entering into a service agreement is to set the general terms of service along with expected standards and key performance indexes. Here, each party needs the protection of non – solicitation from the other as they ought to share information related to businesses during the term of the agreement. 

Non solicitation clause for Freelancers 

The concept of hiring freelancers has been on a hike since the COVID-19 pandemic. Besides, startups can gain access to expert skill sets at a cheaper cost. However, any business entering into a freelance agreement would want to protect its resources from the freelancer’s unauthorised usage. Hence, having a non solicitation clause is an integral part of the freelance agreement. 

What is the Non solicitation agreement format?

Now that we know that the scope of non solicitation is varied, it is important to understand its key inclusions. You can draft an ideal non solicitation agreement only after understanding the specific needs of the parties and the business relationship they are about to enter. Let’s dive into the key clauses of non solicitation agreement: 

Party Details

For a legal agreement to be valid and enforceable, it needs to define the parties to the agreement in an appropriate manner. This includes the name, address, age, occupation, etc of the parties. 

Term of non solicitation

This is the most important part of your agreement. Here you need to define the period of non solicitation. The restrictive covenant of non solicitation can only last for a specified period. Let’s understand this with an example. 

Term of non solicitation example

Raj was hired as a software developer for XYZ Pvt Ltd. While joining the organisation, he was made to sign a non solicitation agreement. In this agreement, he was restricted from soliciting or trying to solicit any of the business contacts, etc. for the duration of the employment and 2 years post-employment.

Here, the entire employment duration and two years (cool off) period is the term of non solicitation. 

Scope of Agreement

The agreement must clearly define the scope of non solicitation, you must provide a list of the resources that fall under the ambit of non solicitation. 

Non-Compete

Usually, both non-solicitation and non compete clause go hand in hand. Especially when it comes to employment contracts, the employer usually puts the non compete for the same term as the non solicitation. 

Legal Validity of non solicitation in India

It is no secret that non solicitation puts certain restriction on the employment or trade of an individual. Hence, it must be drafted very carefully to make it legally enforceable. The courts of India have also given differing views regarding the validity of non solicitation agreements. The enforceability depends on many factors such as: 

• The term of non solicitation; 
• Amount of resources, training, etc. used on the employee for skill improvement;
• The restriction can only be for a specific period; and 
• Lastly, the terms of the agreement must not be too redundant. 

Keynote: The Delhi High Court, in a landmark judgment in Wipro Limited vs Beckman Coulter International S.A. on 11 July, 2006 Delhi, held that while deciding the validity of the non solicitation agreements, the court shall take a more stringent approach when dealing with employee-employer contracts than in other contracts, such as partnerships. The reason is the fact that in employment, one party is in a dominant position. 

Pro Tips on Drafting an Effective non solicitation agreement

Before you sign any non solicitation agreement, considering these points will help you mitigate future risks: 

• Ensure that the term of non solicitation and the scope are mentioned clearly;
• Adding an arbitration clause will help in making easy decisions in case of future disputes; and
• Getting the agreement reviewed by a legal service provider will ensure your rights are protected.

Also Read: What is a software development agreement?

Conclusion

To conclude, having a negative covenant like non solicitation clause is not seen as a restriction on trade or profession until it out-rightly puts certain restrictions. Hence, to make your non solicitation agreement effective, you must get assistance from experts who can guide you based on your specific requirements. You can connect with LegalWiz.in experts to ensure that your agreement is on point and safeguard your rights.