Working with independent contractors 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. 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.
What are non-solicitation agreements?
Non-solicitation agreements are commonly included in employment contracts, share purchase agreements, and contractor agreements. These are legally binding agreements meant to stop an employee or independent contractor who worked with a business from poaching that business’s customers or employees.
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.
It’s worth noting that non-solicitation agreements aren’t always enforceable, even if both the employer and the independent contractor sign one. Laws and enforcement vary by location, but in general, the activity covered by a non-solicitation agreement must include:
- A specific, direct appeal to an employee, client, or customer of the hiring company; simply posting an ad in a public forum where one of these people might see it would likely not qualify as a prohibited solicitation
- A professional relationship with the contacted party developed during the independent contractor’s time with the company or access to information about them through the work the contractor completed for the company
If the independent contractor does not initiate contact with the customer or supplier of the hiring company, that likely won’t qualify as a banned solicitation.
Why do companies use non-solicitation agreements?
Companies use non-solicitation agreements to protect their vital relationships with clients and employees. They’re especially useful when the company is working with an independent contractor who is going to have significant interaction with employees, customers, and clients of the business.
Non-solicitation agreements aren’t just applicable when working with independent contractors, though. Employees frequently need to sign non-solicitation agreements as part of their employment contracts. Much like with an independent contractor, the non-solicitation agreement keeps those employees from bringing along other employees or customers if they leave the company.
Many businesses also include non-solicitation agreements in contracts for the sale or restructuring of the company. In this case, the agreement might prevent the previous owner of the company from taking clients and staff with them into their next business 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.
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.
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.
Let’s say a web development company hires an independent contractor to create websites for several of its clients. During his time in that role, the independent contractor learns the names of those clients and other details about their companies. He finishes his work with the web development company and collects his contractor pay. Afterward, he reaches out by email to the company’s clients whose websites he created and offers his services to them directly. This would be considered a solicitation that violates the independent contractor's non-solicitation agreement.
Another example of solicitation would be if an independent contractor hired to do graphic design work for a marketing agency left the agency and encouraged some of the agency’s employees to come with her. If, after working with the agency’s employees, the independent contractor goes on to ask them to work for her own company or another company, that would be the kind of solicitation prohibited by non-solicitation clauses.
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.
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