The ugliest breakups are the ones where the former partners try to get everyone in their circle to choose sides. If they succeed, they sow enmity among almost everyone they know. This happens with marriages and with rock bands, but it also happens with business ventures. When business partnerships break up, it can be as ugly as any celebrity divorce. Agreements that business partners sign while winding down their shared business venture can function the way that marital settlement agreements function in divorce cases.
The law has a built-in cheat code where you can stop the court from dictating the resolution of your conflicts if you and your opponent can reach a resolution between yourselves. This is as true in collaborative divorce as it is in agreements between former business partners. Former business partners might sign non-compete agreements in which they set boundaries regarding competing with each other after they stop working together.
The Bozeman non-solicitation of employees lawyers at HKM Employment Attorneys LLP can help you draft agreements regarding the solicitation of employees by former business partners.
Non-Solicitation of Employees as a Provision of Non-Compete Agreements
Non-compete agreements between former business partners can be an effective way to prevent litigation when each former partner goes on to establish a new business venture. Montana law frowns on excessively restrictive non-compete agreements, not only for former employees, but also for former business partners. It is not fair for former business partners to try to force each other out of their shared industry. Non-compete agreements between former business partners should not be “this town ain’t big enough for the both of us” agreements. It is in the interest of free enterprise that people who previously operated a business together should be able to later operate businesses that, at least in theory, compete for the same clients.
There is such a thing as a non-solicitation provision in a non-compete agreement aimed at preventing client poaching. These clauses usually state that, when the partners have previously approached a client jointly and done business with them, neither one shall approach the client separately to recruit them as a client for the former partner’s new business. As with most non-compete provisions, these clauses are time-limited. The understanding is that the clients may choose to do business with one of the former partners, both, or neither. In other words, the agreements are meant to stop one partner from cutting the other partner out and then rebuilding the business without the former partner.
Just as former partners might want to prevent client poaching, they might also want to prevent the poaching of former clients. You can include non-solicitation clauses in your agreement regarding the recruitment of employees who previously worked for the business that the former partners operated together, but you should word them carefully. A restriction on employees that a former partner can hire is also a restriction on employers with whom the employee can work. A Bozeman non-compete agreement attorney can help you figure out what kinds of competition you can fairly restrict when it comes to the solicitation of employees.
What Does Non-Solicitation of Employees Look Like From an Employee’s Perspective?
Non-compete agreements between an employer and an employee are more common than non-compete agreements between former business partners. When an employee quits a job, the employer might ask the employee to sign a non-compete agreement, promising not to set up a business that competes directly with the former employer or, if the employee is free to set up a competing business, not to poach the employer’s clients by contacting them by contact information that they obtained while working for the former employer.
Sometimes, non-compete agreements for employees prohibit the employee from working for businesses that compete directly with the former employer. If enforced, these provisions have the same effect as an agreement signed between two businesses, in which they promise not to solicit each other’s employees. The Bozeman non-compete agreement lawyers at HKM Employment Attorneys LLP can help you draft agreements that prohibit your former business partners from hiring your employees or that prohibit your former employees from working for your competitors.
The main difference between these two types of agreements is who is legally responsible for paying the damages in the event of litigation arising from a breach of the agreement. A company has greater means to pay a settlement in a lawsuit than does an individual who relies on employment income. Therefore, the threat of a lawsuit over the breach of a non-compete agreement may be more effective against an employee than against a former business partner.
Are Non-Solicitation Agreements Enforceable in Montana?
When your previous business venture folded, you might have signed a non-solicitation agreement with your former business partner, and you might have drafted and signed it hastily, just so you could move on from your failed enterprise and get started on your next entrepreneurial endeavor. Now that your new business is getting off the ground, and you have started to hire employees, you might wonder if you are placing yourself at risk of a lawsuit from your former partner if you hire anyone who used to work for you and your ex-partner when you were in business together.
Montana case law is more favorable than the laws of some other states toward former employees and former business partners who want to compete with their former associates, despite what a non-compete agreement says. The courts of Montana have the right to strike non-compete provisions from contracts while maintaining that the rest of the contract is enforceable. This does not mean, however, that the courts never enforce non-compete or non-solicitation provisions. Instead, the courts decide on a case-by-case basis whether to enforce non-solicitation agreements between former business partners.
Call HKM Employment AttorneysAbout Non-Solicitation Agreements
The Bozeman employment lawyers at HKM Employment Attorneys LLP can counsel you about non-solicitation of employees provisions. Contact the employment lawyers at HKM Employment Attorneys LLP in Bozeman, Montana, to set up a consultation at (406) 926-7398.
