Non-Solicitation Agreements: Customer, Employee, and State Rules

Non-Solicitation Clauses Survived the Non-Compete Crackdown — for Now

In April 2024, the FTC issued a rule banning most non-compete agreements nationwide, citing harm to worker mobility and wages. Federal courts blocked the rule before it took effect, and its fate remains uncertain. But non-solicitation agreements — often bundled with non-competes in the same employment contracts — have received far less regulatory scrutiny and remain broadly enforceable in most states. Employers rely on them as the primary post-employment restriction after non-competes have been weakened or invalidated. Understanding the difference between customer and employee non-solicitation, and knowing which states treat them as prohibited or enforceable, is essential for both employees and employers.

Customer Non-Solicitation vs. Employee Non-Solicitation

Non-solicitation clauses fall into two distinct categories that courts analyze differently.

Customer (client) non-solicitation agreements prohibit a departing employee from soliciting the company's customers after leaving. They are narrower than non-competes because the employee can still work in the same industry — just not actively pursue the former employer's specific clients. The restriction must be limited to customers the employee actually interacted with or had access to confidential information about, not every customer the company has ever served.

Employee non-solicitation (also called anti-poaching or no-hire clauses) prohibit a departing employee from recruiting former colleagues to leave the company. Courts scrutinize these more critically in recent years — a blanket prohibition on recruiting any of the employer's thousands of employees is increasingly being treated like a de facto non-compete.

California's Prohibition

California Business and Professions Code Section 16600 voids any contract that restrains a person from engaging in a lawful profession, trade, or business. The California Supreme Court, in Edwards v. Arthur Andersen LLP (2008), held that Section 16600 bars non-compete clauses categorically — not just unreasonable ones. California courts have extended this reasoning to customer non-solicitation agreements.

The California Court of Appeal in Loral Corp. v. Moyes (1985) had created a narrow exception for customer non-solicitation, but subsequent decisions — particularly after Edwards — have narrowed or eliminated it. In 2024, the California Supreme Court affirmed in Ixchel Pharma, LLC v. Biogen, Inc.-related precedents that non-solicitation provisions are evaluated under Section 16600's strict invalidity framework unless the restriction fits within a statutory exception (sale of business, dissolution of partnership).

• California employers cannot enforce customer non-solicitation clauses against former employees
• Employee non-solicitation clauses face the same prohibition under the 2024 clarification
• Employers may still protect trade secrets under the California Uniform Trade Secrets Act (CUTSA)
• Choice-of-law clauses designating another state's law do not save non-solicitation clauses for California-based employees

The Legitimate Business Interest Test

Outside California, courts in most states apply a "legitimate business interest" test. A non-solicitation clause is enforceable only if it protects a legitimate business interest that cannot be adequately protected by a less restrictive means. Courts weigh:

• Customer relationships: Were they developed through the employee's personal effort, or through the employer's marketing and infrastructure? Relationships developed primarily by the employee — before joining the company — are not the employer's to protect.
• Trade secrets and confidential information: Does the employee possess specific knowledge of pricing, customer preferences, or technical processes that would give the solicited customer an unfair advantage?
• Specialized training: Did the employer provide unique training at substantial cost that the employee could not have obtained elsewhere?
• Goodwill: Was customer goodwill built using the employer's resources, or was it personal goodwill belonging to the employee?

Blue Penciling vs. Voiding

When a court finds a non-solicitation clause overbroad, it has two options. It can void the entire provision (as California does), or it can "blue pencil" — rewrite the clause to make it enforceable. Florida courts must reform overbroad clauses. New York courts apply a reasonableness standard but are more willing to modify than void. The trend of voiding overbroad clauses rather than reforming them is growing in academic and judicial commentary, because voiding creates better incentives for employers to draft reasonable restrictions from the start.

This article is for informational purposes only and does not constitute legal advice.