Non-solicitaion Policy
vincem
1 Post
My company is a non-profit resource for several member insurance companies. Our workforce consists of 45 employees, of which 24 of them are loss prevention inspectors. The inspectors are "home grown" in that they are literally extensively trained for 3-4 months in what they need to know.
Over the past several years, several of the employees have either retired, or quit to form an independent inspection service, contracting directly with the member companies and effectively taking work away from us. The member companies do it because the cost is obviously cheaper as there is no overhead expenses, they are more directly under their control, and the quality of work is essentially identical to ours. There is nothing to prevent the member companies from contracting with other independent contractors. Asking the member comapnies to abastain from this practice is not viable for a variety of reasons. Also due to our current backlog, I am not in a position to ask this of them. Once the backlog gets under control, this would be an option.
I am instituting a non-solicitation agrement for 1 year of accepting any work from the member companies after the employment is terminated. I am getting incredible pushback from the employees. Much I suspect is due to their lack of understanding - which will be addressed immediately. I intend to explain to them that it is as much for their own protection as ours, as if an employee leaves and takes a large portfolio with them, the ramifications may be that there will be a reduction in workforce due to the decreased workload. I should also add that I have only been with this company as the President for less than a year.
I am presently having legal counsel review this and their indication is that it is normal practice and if anything the 1 year time frame should be longer.
Is there anything that I am missing? What happens if the majority elects to not sign the document? I can easily say that the immediate and long term effects will be that the employee will be suspect as to their intentions. Making it a condition of employement will only work for new hires, as if the majority elects not to sign, we can not elect to replace them. I am looking for any advice or guidance.
Over the past several years, several of the employees have either retired, or quit to form an independent inspection service, contracting directly with the member companies and effectively taking work away from us. The member companies do it because the cost is obviously cheaper as there is no overhead expenses, they are more directly under their control, and the quality of work is essentially identical to ours. There is nothing to prevent the member companies from contracting with other independent contractors. Asking the member comapnies to abastain from this practice is not viable for a variety of reasons. Also due to our current backlog, I am not in a position to ask this of them. Once the backlog gets under control, this would be an option.
I am instituting a non-solicitation agrement for 1 year of accepting any work from the member companies after the employment is terminated. I am getting incredible pushback from the employees. Much I suspect is due to their lack of understanding - which will be addressed immediately. I intend to explain to them that it is as much for their own protection as ours, as if an employee leaves and takes a large portfolio with them, the ramifications may be that there will be a reduction in workforce due to the decreased workload. I should also add that I have only been with this company as the President for less than a year.
I am presently having legal counsel review this and their indication is that it is normal practice and if anything the 1 year time frame should be longer.
Is there anything that I am missing? What happens if the majority elects to not sign the document? I can easily say that the immediate and long term effects will be that the employee will be suspect as to their intentions. Making it a condition of employement will only work for new hires, as if the majority elects not to sign, we can not elect to replace them. I am looking for any advice or guidance.
Comments
We decided to impose a mandatory agreement for certain employees who were doing much what you suggest. I think you're referring to a restrictive covenant vs non-solicitation, but the essence of it was this:
* the employee was required to sign the agreement and we offered "consideration" of $300 to incent them. Failure to sign resulted in discharge. You have to be prepared to enforce this and we were.
* the same requirement was imposed for new hires as a condition of employment and they gladly obliged.
States have very different rules about this, so be certain to know your state statutes. Many states require the restriction to be within "X" miles, or certain counties, etc... and for no more than two (2) years. Trying to impose this restriction w/o understanding the legal issues will result in a non-enforceable agreement. I would recommend getting some legal advise, cuz whenever employers start imposing restrictions on one's ability to earn a living, it makes people question the motive and legality. This is a legal issue.
We have offices in many major US cities, but we use the same non-solicitation agreement.... knowing that in some states it's totally unenforceable.
From what I gather, there's a thin line between a former employee being able to earn a living in their chosen profession and stealing business from a former employer that actually results in significant damage to the former employer's ability to conduct their business. It's a sticky issue that we deal with almost every time a senior level person, with great relationships with our clients, decides to leave the firm.