What is a non-competition clause?

More commonly referred to as “non-compete,” this type of provision includes an agreement in which one party promises not to take certain actions that could increase competition for the other party. More specifically, these clauses typically prevent individual’s from working for a competitor, or having an ownership interest in a competitor, during and after the individual’s period of employment by, or ownership of, a business.  In addition to being limited in scope to a specific industry or performing specific job responsibilities, these provision generally apply over a limited period of time, within a limited geographic area.  These clauses are most common in the employment context or pursuant to the sale or ownership of a business.  Non-compete clauses may be standalone agreements or could be included in a more comprehensive contract.

What is a non-solicitation clause?

A non-solicitation clause typically restricts former employees or owners of a business either from soliciting clients or employees of the business. This type of agreement is usually found in the employment or sale of a business context as well, particularly when the nature of the business is highly competitive.  These types of provisions are generally not standalone agreements and are more commonly found as a part of a more comprehensive contract.

How do these clauses differ?

Non-competition and non-solicitation provisions are both considered restrictive covenants. The main purpose of a non-competition clause is to restrict workers from seeking a job with a competitor or from starting a competing business. Former employees may have valuable information and expertise that may hinder their former employer’s competitive advantage unless they are restricted. The main purpose of a non-solicitation clause, on the other hand, is to protect a former employer’s business relationships with both their current employees and customers. Whether an employee or an employer, it is important to understand the applicability and enforceability of the restrictive covenants in your agreements.

If you have any questions or want assistance with information relating to non-competition and non-solicitation clauses, please reach out to one of our attorneys at McNeelyLaw LLP by calling (317) 825-5110.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.