What is a Non-Solicitation Agreement?

A non-solicitation agreement is a contract designed to prevent former employees from persuading their former employer’s customers, clients or business contacts to move their business to a new employer. In the context of Illinois employment law, these agreements are generally used to protect a company’s interest by preventing employees from soliciting business from former clients for a period of time after they leave the employment of the company. This is particularly important in professions where breach of such a contract can literally be the difference between existence and failure. The fair application and enforcement of not only these contracts but also trade secrets and other confidential information is crucial to maintaining healthy competition and innovation while protecting business interests .
These clauses are often found in broader employment contracts or may be set out as standalone agreements, perhaps as part of a nondisclosure agreement. For the most part, these agreements are interpreted fairly narrowly so as to allow for an free-flow of information that should not be restricted by a contract. Depending on how the agreement is worded and its purpose can vary greatly from case to case. It may place simply a limit on the ability of the employee to contact former customers for a specific period of time after leaving the company, or it may apply to all former contacts to which the employee had contact with regardless of the outcome of that contact. This brings into play a much more nuanced interpretation and application of the contract.

Illinois Law

In Illinois, non-solicitation agreements are typically governed by the Illinois Freedom to Work Act (IFWA), the Illinois Trade Secrets Act (ITSA), and Illinois common law.
The IFWA restricts non-compete restrictive covenants, including non-solicitation provisions in employee contracts, to two years following termination of employment with the employer. The clause is enforceable only if the employer can establish that the clause is ancillary to a contract that is otherwise enforceable under the IFWA.
ITSA protects trade secrets from being misappropriated, which includes using trade secrets outside the scope of one’s employment. In the context of non-solicitation agreements, if a former employee uses a trade secret to entice former customers away from their old employer, the employer may have a claim for misappropriation against the former employee.
Common law on non-solicitation agreements holds that when an employee enters into an employment contract with a current or former employer and agrees not to solicit or interfere with the company’s business if they no longer work there, it is enforceable. Nevertheless, non-solicitation agreements must be reasonable. Applicable factors to determine reasonableness include:
• Whether it is necessary to protect a legitimate employer interest
• Whether the scope of restrictions are no greater than needed to protect the employer’s interest
• Whether the duration and geographic area of the restriction are reasonable
• Whether the employee will be allowed to earn a livelihood

Elements of a Valid Non-Solicitation Agreement

Like all contracts, there must be consideration for the promise contained in a non-solicitation agreement. Consideration is anything of value given to a recipient. In the case of non-solicitation agreements, continued employment or additional compensation may constitute consideration. The agreement may indubitably constitute consideration by stating that the employer will continue to employ the employee on the same or better employment terms. The agreement is also required to be reasonable. When considering the reasonableness of a non-solicitation agreement, Illinois courts will evaluate the following: (1) the time restrictions; (2) geographic limits; and (3) whether the restraint on the employee’s ability to earn a living is reasonable. The stated purpose of a valid non-solicitation agreement must be clear and reasonable – advancement of legitimate competitive business interests. In other words, the restrictions imposed on the employee cannot be more than what an employer needs to protect its business interests.

Non-Compete Agreements v. Non-Solicitation Agreements

From our blog and our law firm, what I know to be true is that these are two different things. You can have a non-solicitation agreement without a non-compete agreement. You can have a non-compete agreement without a non-solicitation agreement. It’s important to recognize these terms are often used interchangeably by many. They also are used differently by different lawyers where lately I’ve seen a non-solicitation agreement called a non-compete agreement even though they are not the same thing.
So real quickly, a non-compete agreement is prohibiting someone to work for a period of time after quitting or being fired in the same market in which the former employer operates either, 1) at all, or, 2) more than X number of miles from the former employer’s office or some type of territory.
A non-solicitation agreement is an agreement that prohibits you from soliciting or contacting former clients for a period of time after your employment. Soliciting simply means the communication of a desire for something from someone, in this case, it normally would mean for business.
One of the key differences is for non-solicitation agreements in Illinois, that in many cases, unless it’s really extreme, you do not need to get additional consideration. The only consideration needed to be in an Illinois non-solicitation agreement is your continued employment with the company. That’s a big deal because in a non-solicitation agreement, you are not being prohibited from actually going out into the marketplace and making a living. In a non-compete situation you are.
On the flip side, a non-compete agreement in Illinois is not enforceable unless the person has given valuable consideration in exchange. That could be being fired and getting severance.
It could also be a situation where you make an agreement with the employer to not work for two years and so the employer says okay, then we’ll continue paying you salary for two years.

Common Problems in Enforcing Non-Solicitation Agreements

Employers often face significant roadblocks when attempting to enforce a non-solicitation agreement, particularly because Illinois courts are reluctant to enforce provisions that could be construed as a noncompete agreement. For example, in Helms Bakery Ltd. v. Sutherland, a federal court for the Northern District of Illinois refused to enforce a non-solicitation provision that barred a former employee from soliciting other employees. 2018 U.S. Dist. LEXIS 135825, *6 (N.D. Ill. Aug. 13, 2018). The court reasoned that the provision restricted other employees from leaving the employer for four years, which was a geographic and temporal restriction far longer than necessary. Id. In contrast, a provision that prohibits the solicitation of customers directly relates to an employer’s protectable interests and may be considered valid so long as it does not extend beyond that necessary to protect those interests. See Barry E. Brenner, et al . , Non-Compete Agreements: Practical Responses to Common Questions, 20 Computer & Internet Lawyer 1 (2012).
Further, problems can arise where there is an unclear definition of solicitation. For example, in Digital Realty Trust, Inc. v. Somers, the U.S. Supreme Court found that a terminated employee gave notice by sending an email to a former co-worker asking if he was free on the following Saturday to leave separately. 138 S. Ct. 767, 772 (2018). The U.S. Supreme Court reversed the decision of the U.S. Court of Appeals for the Ninth Circuit which had held that a whistleblower like the plaintiff under the Exchange Act had to provide some form of formal notice before he could be considered to have submitted a tip for the purpose of whistleblower protections. Id. at 775. Illinois courts have not had occasion to consider whether informal notice is sufficient to trigger whistleblower protections, but it is possible that an employee could argue that an informal solicitation is not a solicitation.

What Employers Should Include in Their Agreements

Enforceability of a non-solicitation agreement beyond the employment agreement has become an area of interest for employers and employees alike. As discussed above in the context of non-compete and other restrictive covenants, there is no "one size fits all" agreement that provides the best protection under Illinois law. Non-solicitation agreements that include time and geographical limitations that are deemed reasonable will be more likely to be upheld. Further, defining the scope of the non-solicitation provision to prevent contacts with clients, other employees and suppliers, can also increase enforceability. The longer the employee has worked for the employer, the more limited the post-termination obligations should be correspondingly (in terms of time, geography and scope). The most important factors for employers are that the language used should be specific and clear, so that both parties understand their obligations, and must be tailored to the needs of each individual employee.

Recent Cases and Developments

The varied and complex nature of litigation involving non-solicitation agreements means that no two cases are exactly alike. Over the past few years, Illinois state and federal courts have addressed some important aspects of non-solicitation agreements that shed new light on their severability, the standard for issuing injunctions, choosing to exercise their discretion on which law to apply in non-solicitation agreement cases based on the competing interests between states, among others. To demonstrate the importance of this area of law, it is first necessary to provide context on recent cases.
In 2012, a former employee of Wells Fargo sued the bank for declaratory judgment after the employee resigned and Wells Fargo indicated that it did not consider the resignation important enough to release the employee from his non-solicitation agreement or non-disparagement agreement, agreements that prevented him from working for a competitor less than 300 miles away from WellsFargo for a year after his departure. The court found for the employee, declaring that the non-solicitation agreement was unenforceable because it significantly restricted the employee’s ability to work in other areas of the financial services industry. Wells Fargo Home Mortgage v. Eregli, 25 F. Supp. 3d 1007 (N.D. Ill. 2014).
In 2014, the Seventh Circuit Court of Appeals upheld an injunction under a non-solicitation agreement that prohibited brokers from "doing business with personal clients" with whom they had done business with at their previous firm. The appeals court decision in support of the injunction relied on the Illinois trade secrets statute, 765 ILCS 1065/8, under which employers may seek injunctive relief for "actual or threatened misappropriation." Court determined that the employee’s solicitation of clients satisfied this standard for injunctive relief. Access Fine Jewelers, Inc. v. Robbins, 759 F.3d 754 (7th Cir. 2014).
In 2015, the U.S. Court of Appeals for the Seventh Circuit upheld an injunction under a non-solicitation agreement, joining with other federal circuit courts in finding that the absence of express durational limit for the non-solicitation agreement did not make the agreement overly broad or invalid. Reliable Fire Equipment Co. v. Arredondo, 2015 WL 1265841 (7th Cir. 2015). The taking of clients in violation of a non-solicitation agreement can be equally damaging to employers of any size. Indeed, notice has been taken in several recent cases.

Conclusion & The Future

In conclusion, Illinois non-solicitation agreements (NSAs) for employees generally require some post-employment, either to customers or to employees, and they may be more difficult to enforce if they’re perceived as being too broad. As a result, businesses should be wary of broadly-worded NSAs, especially those that include managers as well as customer-facing employees, and consult with a lawyer to draft a potentially enforceable, narrowly-scoped non-solicitation clause tailored to their business model.
We anticipate that the Illinois state legislature may address non-solicitation agreements in more depth in the near future. For example, the recently passed Illinois Freedom to Work Act did not mention non-solicitation agreements in transactions. Potentially, the state legislature may consider some private "rollback" provisions for NSAs , similar to the provision in the ILLINOIS ILLINOIS ANTI-RAIDING ACT, which prohibits no-hire NSAs between businesses, but only if both businesses have "equal bargaining power."
Furthermore, if similar provisions are introduced into the Illinois General Corporation Law, then those external NSAs that prohibit former employees from soliciting customers of the previous employer (or that simply notify sellers that they cannot do business with former employees under their NSA) could become problematic during M&A transactions, including the express exemptions carved out in the recent amendments to the Illinois Business Corporation Act.
With the rise of non-compete agreements for customers, we can expect to see a continuing expansion of the use, sophistication, number and problem-solving approach, behind NSAs in Illinois in the near future.