Covenants Not to Solicit

While a covenant not to compete can prevent a leaving employee from competing with you, using all of the information you gave him and all of the skills that you taught him as an employee, there are still some risks when an important employees leaves.

Companies build up a huge investment in finding, interviewing, training, teaching, and paying employees. What would it cost to do this again, because someone took some of your employees? Moreover, the cost of interruptions in a company’s operations is substantial, because there are key functions that are not being performed while the replacement employee is found and trained. There is a loss of productivity and profits.

But the bottom line is the value of the network between a company’s employees. Their interactions as a team are learned. They have to learn not only their functions, but also the functions of those with whom they interact. And there is the personal side of things. You learn how each other works, and how to interact with them as people. When the network breaks, due to the loss of a few employees, profits go down dramatically. And, while it takes time and money to get a new employee, the time to repair a network is even more of a problem.

To prevent a leaving employee from recruiting part of your team and network away from you, you must have an ironclad covenant not to solicit. With one in place, the leaving employee is liable in damages if he or she tries to hire any of your other employees. On occasion, this covenant will include a provision that the leaving employee cannot hire any of your employees, even if you do not solicit them, and they simply come to you, and apply for a job. No hiring them.

This covenant can be particularly important if the leaving employee competes with you. If you cannot prevent the competition on a covenant not to compete, you can slow them down by barring your network from migrating to her or him.

The longest period that I have seen for a covenant not to solicit is three years. Generally, you see one or two year covenants not to solicit, to avoid possible legal ramifications of a restriction on your employees’ employment options. When you have your covenant not to solicit written, do not have a period longer than two years.