Working with independent contractors—a group that included 11.9 million people in the U.S. as of July 2023—instead of directly hiring employees comes with many advantages for a business. Even so, there's a risk that a contractor could draw customers or employees away from your business.
One way to address this issue is to use an independent contractor non-solicitation agreement. If you hire independent contractors, understanding and possibly implementing these agreements is key to protecting your business, especially since over 80% of contractors preferred their work arrangement over traditional employment in 2023. This guide outlines what independent contractor non-solicitation agreements are, why companies use them, and what solicitation looks like in practice. Having this background ensures you'll be ready to implement such an agreement if it's appropriate for your business.
Want to see the Oyster platform in action? Book a demo and we promise to show you all the features that'll make your People Ops team go "woah."
What are non-solicitation agreements?
A non-solicitation agreement is a legal contract that prevents contractors or employees from poaching your clients or staff after they leave. You'll typically find these agreements included in employment contracts, contractor agreements, and business sale documents.
People often confuse non-solicitation agreements with non-compete agreements, but there are some distinctions between the two. Non-compete clauses are meant to keep an employee or independent contractor from competing in the same industry as the company that hired them for a set period.
By contrast, independent contractor non-solicitation agreements only prevent the independent contractor from trying to work with the company's clients or employees. They do not stop independent contractors from working with a direct competitor of the company or acting as a competitor in the industry themselves.
Here's the thing—signed doesn't always mean enforceable. Laws vary by location, but courts typically look for these elements:
- Direct contact: The contractor actively reached out to your clients or employees
- Business relationship: They gained access to these contacts through their work with you
- Intentional solicitation: They specifically tried to win business or recruit people
Simply posting a public job ad that your employees might see? That usually doesn't count as prohibited solicitation.
Why do companies use non-solicitation agreements?
Why do companies bother with these agreements? They're protecting relationships that took years to build.
You'll typically see non-solicitation agreements in these situations:
- Contractor relationships: When contractors have direct access to your clients or employees
- Employee contracts: Preventing departing staff from poaching teammates or customers
- Business sales: Stopping former owners from taking relationships to their next venture
In each example, the non-solicitation agreement serves to protect the company from unfairly losing clients or employees to someone who previously worked for or with the company—a vital consideration when 6.9 million people hold contingent jobs.
If you're planning on hiring an independent contractor, it may be a good idea to get them to sign a non-solicitation agreement to safeguard your business.
Are Non-solicitation Agreements Enforceable For Contractors?
So, is a signed agreement actually enforceable? It depends on whether courts view it as reasonable and necessary.
Here's what makes a non-solicitation agreement enforceable:
- Reasonable scope: Limited time period and geographic area
- Specific protection: Covers actual relationships the contractor accessed through their work
- Legitimate interest: Protects genuine business relationships, not just industry competition
Key Elements Of An Effective Non-solicitation Agreement
To improve the chances of your non-solicitation agreement being enforceable, it should be clear, specific, and fair. Consider including these core components:
- A clear definition of solicitation: Specify what actions are prohibited, such as directly contacting clients or employees to offer competing services or employment.
- Identification of restricted parties: Clearly name the groups the contractor cannot solicit, like current clients, prospective clients they engaged with, and current employees.
- A reasonable time limit: Set a specific and reasonable duration for the restriction, typically ranging from six months to two years after the contract ends.
- A defined geographic scope: If applicable, limit the restriction to the specific regions where the company operates and the contractor provided services.
Examples of solicitation by a contractor
Seeing an example of solicitation by a contractor can give you a better idea of what this behavior looks like in practice and the reasons why you might want to prevent it.
Here are two common scenarios that would violate a non-solicitation agreement:
- Client poaching: A web developer finishes a project, then emails the company's clients directly to offer competing services
- Employee recruitment: A graphic designer leaves an agency and tries to recruit former colleagues to join her new company
In both cases, the contractor used relationships gained through their work to compete against their former client.
Protecting Your Business While Building Global Teams
Using a well-crafted non-solicitation agreement is a smart way to protect your business's client and employee relationships when working with independent contractors. By ensuring your agreements are reasonable, specific, and fair, you can mitigate risks while confidently building your distributed team. As you expand your global workforce, having compliant and clear contracts in place is the foundation for sustainable growth. Ready to build your global team the right way? Start hiring globally with a partner who understands the complexities of compliant employment.
Converting contractors to employees with Oyster
Hiring contractors comes with a few risks, including solicitation of clients. If you choose instead to reduce risk and go down the employee route, it’s common to convert contractors into employees, and Oyster can help.
Hiring contractors may seem like a simple way to scale your team quickly. But if a contractor actually operates like an employee, your company could be exposed to various legal, financial, and operational risks.
Not to worry. Oyster’s contractor conversion solution can help you assess your risks in different countries, weigh the costs and benefits of both employment models, and compliantly transition contractors to full-time employment.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
.webp)
.avif)
