The word “solicit” means to make a petition. A non-solicitation clause in an employment contract is a clause that restricts a former employee of the company after his termination from poaching any previous clients, other colleagues, or any other ideas of the employer to benefit his own needs. So basically, what this clause does is protect the employer from any act of the former employees that seeks to extort its other employees or customers. Non-solicitation clauses are those that come into effect after the termination of an employee. A non-solicitation clause is similar to a rule in a contract that prohibits you from trying to take clients, associates, or business prospects from your present company if you quit.
Need for non-solicitation clause in employment contracts-
One of the needs for a non-solicitation clause in an employment contract is that it makes it easier for the company or employer to take action against such former employees who try to lure their present employees or their clients or customers.
*A non-solicitation clause also ensures that once an employee is terminated, he will not be able to disclose the confidential information that he had with him while he was part of the company. It prevents former employees from disclosing any information related to the company to any third party after their termination.
*This clause indirectly brings stability to the company. It prevents other employees from quitting their jobs because of the influence of the former employee.
*It also provides for compensation or other reliefs to be provided to the company or third party in case of a violation of this clause. If the terminated employee discloses the confidential information concerned to any third party, then the clause must contain terms and reliefs to be sorted out for the company as well as the third party concerned.
*In highly competitive industries, having staff that is not easily accessible to competitors can provide an advantage. Non-solicitation agreements help to preserve this benefit in part.
Non-solicitation clauses in an employment contract provide the company with a lot of benefits when there is a termination of an employee. It protects the relationship between companies and other employees, clients, or customers.
Advantages and disadvantages of non-solicitation clause in employment contracts-
1. It protects the relationship that the employer has with the employees, customers, or clients.
2. In a competitive world, this clause gives an edge to the employer by preventing other employees from joining other companies that compete.
3. It also helps in preserving confidential information from being leaked by terminated employees.
4.It gives clarity regarding what the former employees can or can’t do when they are terminated.
5. It brings about stability as well as enhances the smooth functioning of the company even after the termination.
Some of the disadvantages of the non-solicitation clause that can be argued are:
1. The non-solicitation clause indirectly restricts the freedom of the employee to continue to choose to carry on the business that he wants to. It puts restrictions on the former employee’s ability to pursue job opportunities.
2.These restrictions, in the bigger picture, will have an impact on competition and innovation.
3. Non-solicitation clauses without any valid reasons create much greater problems to the extent that they may affect hiring new employees for the company.
4. At the end of the day, the non-solicitation clause will not hold up if the employees choose to leave the company at their own will.
In Niranjan Shankar Golikari vs. Century Spinning and Manufacturing Co. Ltd. (1967), the Supreme Court laid down a certain foundation for understanding how the courts may assess the scope of non-solicitation clauses. The Court held that such clauses must be reasonable in scope and duration and must not be used to prevent a former employee from pursuing their livelihood.
In addition to the factors considered by the Supreme Court in Niranjan Shankar Golikari vs. Century Spinning and Manufacturing Co. Ltd., courts may also consider the following factors when assessing the scope of a non-solicitation clause:
*The nature of the business and the relationship between the employer and employee.
*The geographic area covered by the clause.
*The duration of the clause.
*The reasonableness of the clause in light of the employee’s position and responsibilities.
Conclusion-
Non-solicitation clauses in an employment contract are designed to protect the company from unfair competition and the loss of confidential information. These clauses typically prohibit an employee from soliciting the company’s customers, clients, or employees for a certain period of time after termination of employment.
There are a number of benefits to having a non-solicitation clause in an employment contract. First, it can help to protect the company’s goodwill and reputation. When an employee leaves a company, they may be tempted to take their customers or clients with them. A non-solicitation clause can help to prevent this by prohibiting the employee from soliciting the company’s customers or clients for a certain period of time.