Question:

What’s the difference between non-compete and non-solicitation clauses?

Answer:

Non-Compete Clause

A non-compete is a provision you would use when severing ties with someone. This could be with an employee, partner, consultant, customer, and you don’t want them to go provide the same services or go work for/with someone else who is a direct competitor. The provision needs to be time-bound and have a geographical limitation.

In California, non-compete clauses are held void as a matter of public policy. Non-solicitation clauses are moving in the same direction in California, but not quite yet. This is because California encourages people to go out and do business without having restrictions. It’s not the same case in a different state, so make sure to pay attention to the choice of law. There is, however, an exception to non-competes being void. If you are a business owner who had a partner and the leaving partner signed a non-compete agreement, that agreement becomes binding.

Non-Solicitation Clause

A non-solicitation clause prevents the person that is signing the agreement, that they cannot solicit partners, employees, or customers of your business. It prevents you from taking people with you when leaving a business for another.

Non-compete and non-solicitation sort of overlap. In order to compete, you may need to solicit and in order to solicit, you may need to be direct competition.

To Wrap Things Up….

If you are put in a situation with non-competes and non-solicits, we recommend you having an attorney review your employment paperwork and advise on the timing of things. By being mindful of the timing, you may still be able to do the kind of business you want to do without violating those provisions you first signed when becoming an employee.

If you have any additional questions regarding non-compete and non-solicitation clauses, please feel free to reach out to our team at bertie@inbetterwetrust.com. We’re happy to help!