If you own a business or oversee personnel, you’ve likely encountered non-compete and non-solicitation clauses. While both aim to safeguard your business interests, they serve distinct purposes. Understanding these differences can help you choose the right protection for your operations.
Understanding non-compete clauses
Non-compete clauses restrict former employees from joining competing companies or starting similar businesses within a specified geographic area and timeframe. For instance, a clause might prohibit someone from accepting a similar position within 50 miles for two years. Indiana courts will enforce these clauses only if they are narrowly tailored, reasonable, and serve a legitimate business purpose. Broad or vague restrictions are likely to be struck down.
What non-solicitation clauses cover
Non-solicitation clauses are designed to protect business relationships rather than restrict employment opportunities. These clauses prevent former employees from soliciting your existing clients, customers, or employees for competitive business purposes. Unlike non-competes, non-solicitation agreements do not block someone from taking a new job—they simply prevent them from leveraging your business contacts to their advantage. Courts often find these clauses more enforceable due to their narrower focus.
Which one should you use?
Your choice depends on the specific risk you’re trying to mitigate. If your concern is a former employee directly competing with your business, a non-compete may be appropriate. If you’re more focused on preserving your client base or workforce, a non-solicitation clause might be a better fit. In some situations, using both may offer stronger protection, provided they are clear, fair, and reasonable.
Courts examine whether a clause protects a legitimate interest, is reasonable in both scope and duration, and doesn’t place excessive limits on a person’s ability to work. Specificity matters. Craft each clause to reflect the needs of your business, and review them regularly as your company evolves or the law changes
