Generally speaking, non-solicitation agreements relate to either customers or employees (with the latter type often called “no-poach” agreements). These types of agreements are most often seen as part of the contracts signed when a business is sold, and the principal employees will not join the buyer or as part of asset purchase agreements where the acquired-from businesses will continue operating. However, non-solicitation agreements are exclusive to business sale/purchase circumstances. Let’s take a look at these different types.

Customer-related non-solicitation agreements

For customer-related non-solicitation agreements, the key obligation is an agreement by one party to not contact or solicit customers of the other party for the purpose of getting the customer to buy from a competing company or otherwise diminish or curtail their business relationship with the other party. One can readily see why this might be an important agreement in the sale of a business. Imagine you buy a small business where there is a strong working relationship with customers by the “key” employee of the selling business. Without a customer non-solicitation agreement, the seller’s key employee can set up a competing business with the buyer, call up his or her former customers, and quickly redirect all of those customers to his or her new business. For obvious reasons, the purpose of buying the business is defeated without a non-solicitation agreement. The same would be true if the key employee of the seller was allowed to call up the customers and just direct them to buy from another competing business.

Are they enforceable?

In some jurisdictions — like California — customer-related non-solicitation agreements are not enforceable under any circumstances. In other jurisdictions, such agreements can be enforced if they are narrowly tailored (like other forms of non-compete agreements). Generally, there must be a short term to the agreement (a year or two), a limited geographic scope and a business purpose limitation. All of these provisions must be reasonable for the circumstances of the sale

Customer-related non-solicitation agreements that are not related to the sale of a business are often not enforceable.

Employee-related non-solicitation agreements

For employee-related non-solicitation agreements, the obligation is not to solicit or induce employees, independent contractors, etc., from terminating employment with the other party. In a business purchase circumstance, this has obvious importance if the key executive employee of the selling business will continue operating and tries to “hire-away” key employees that are transferring to the buyer. Again, the main purpose of the business acquisition/asset purchase can be defeated if employees are hired away to work for a newly created competing business.

Are they enforceable?

In many jurisdictions, employee-related non-solicitation agreements are NOT enforceable. This prohibition is based on several factors. First, employee-related non-solicitation agreements are clear restraints on trade and hinder the free movement of labor, potentially impacting prevailing wages. More importantly, employee-related non-solicitation agreements impose serious impacts on parties — employees — who have not signed the agreement, did not agree to the restrictions, have no method of challenging the agreement and may not even know the agreement exists. All of these violate basic principles of fairness.

To the extent that an employee-related non-solicitation agreement will be considered enforceable, such an agreement will have to be very narrowly tailored and attendant to the sale of a business.

Contact The Business and Merger and Acquisition Attorneys at Revision Legal

For more information, contact the experienced Business and Merger & Acquisition Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

The FTC’s 2023 Non-Compete Rule and Its Impact on Non-Solicitation Agreements

In April 2023, the Federal Trade Commission (FTC) issued a proposed rule that would have banned virtually all non-compete agreements for workers. In 2024, the FTC finalized that rule. However, a federal district court in Texas — and subsequently the Fifth Circuit — blocked the rule from taking effect, holding that the FTC exceeded its statutory authority. As of 2025, the FTC rule has not been enforced, and the legal battle continues. Businesses should monitor this litigation closely, as a final ruling permitting the FTC rule to take effect would dramatically alter the enforceability landscape for all post-employment restrictive covenants, including non-solicitation agreements.

Regardless of the FTC rule’s ultimate fate, non-solicitation agreements in the employment context face increasing state-level restrictions. Several states have enacted statutes that impose income thresholds, advance notice requirements, or outright bans on certain forms of non-solicitation agreements — particularly those restricting lower-wage workers.

Customer Non-Solicitation: Elements Courts Examine for Enforceability

Where customer non-solicitation agreements are enforceable — outside of states like California that ban them categorically — courts typically apply a reasonableness test. The key elements examined are:

• Duration. Courts generally uphold terms of one to two years in business-sale contexts. Terms of three or more years face scrutiny, though courts in some jurisdictions will blue-pencil an unreasonably long term down to an acceptable duration rather than void the entire clause.
• Scope of restricted customers. A clause that prohibits solicitation of all customers in a given industry is more likely to be struck down than one limited to customers with whom the departing employee had direct, documented business relationships. The more the restriction is tailored to protect a legitimate business interest — rather than simply suppressing competition — the more likely it is to hold.
• Legitimate business interest. Courts require that the restriction protect something of real value: customer relationships, trade secrets, confidential customer data, or goodwill built at the employer’s expense. A restriction that protects nothing more than the employer’s desire to limit competition does not satisfy this element.
• Consideration. In employment contexts outside business-sale transactions, a non-solicitation agreement signed after employment has already begun must be supported by new and independent consideration — a raise, a promotion, a signing bonus, or other concrete benefit beyond mere continued employment (in states that follow this rule).

Employee No-Poach Agreements: Antitrust Exposure

Employee-related non-solicitation agreements — often called “no-poach” agreements — have attracted significant antitrust scrutiny in recent years. The Department of Justice Antitrust Division has pursued criminal charges against employers who entered into naked no-poach agreements — meaning agreements between competing employers not to hire each other’s employees that are not ancillary to any legitimate business collaboration.

The Sherman Act, 15 U.S.C. § 1, prohibits agreements in restraint of trade. The DOJ has taken the position that naked no-poach agreements between competing employers are per se illegal under the Sherman Act, regardless of whether they reduce wages or affect output. Several criminal prosecutions have been brought — though jury verdicts have been mixed — and the DOJ has made clear that this enforcement priority will continue. For businesses, this means that any agreement with a competitor that restricts the ability of each company’s employees to seek employment with the other company should be reviewed by antitrust counsel before being implemented.

By contrast, no-poach provisions in franchise agreements, joint venture agreements, and other collaborative arrangements between non-competitors are typically analyzed under the rule of reason and are more likely to survive scrutiny if they are reasonably necessary to protect legitimate business interests in the collaboration.

Non-Solicitation in Business Sales: Best Practices

In business-sale transactions, non-solicitation agreements — often combined with non-compete provisions in a single “restrictive covenants” section of the purchase agreement — should be drafted with careful attention to the following:

• Define “customers” precisely. The agreement should specify whether “customers” means only those customers who purchased from the business within a defined lookback period (such as the 12 or 24 months preceding closing), or whether it includes prospects and potential customers. The broader the definition, the greater the enforceability risk.
• Attach a customer list. In asset purchase transactions, attaching the actual customer list as an exhibit to the agreement eliminates ambiguity about which customers are covered and demonstrates that the buyer received identifiable, valuable goodwill in exchange for the purchase price.
• Include specific remedies. Non-solicitation agreements should specify that breach will cause irreparable harm and that the non-breaching party is entitled to injunctive relief without the requirement of posting a bond. Injunctive relief is the most valuable remedy in this context, because by the time money damages can be calculated, the customer relationships may have been permanently lost.
• Carve out passive solicitation. Courts and arbitrators sometimes require a distinction between active solicitation — cold-calling former customers — and passive acceptance of business from a customer who initiates contact with the former owner. Including explicit language about this distinction reduces litigation uncertainty.

Contact the Business Transaction Attorneys at Revision Legal

Whether you are buying or selling a business, hiring key employees, or defending a non-solicitation claim, the experienced Business Transaction Attorneys at Revision Legal can help you navigate the complex and evolving law governing restrictive covenants. Contact us through the form on this page or call (855) 473-8474.