Hiring and Solicitation
Commercial Contract
Table of Contents:
Exceptions
Penalty
Hiring and Solicitation
As part of a contractual relationship, a party may agree to refrain from hiring personnel of the other party during the contract term and for a specific period after term expiration. Although such terms may be useful against employee poaching, such “no hire/no solicit” clauses can be unfair and problematic if they are crafted too broadly or vaguely.
Accordingly, the parties may benefit from carefully identifying which personnel are subject to a hiring ban and how personnel may be solicited and hired. The following exemplar limits the universe of personnel who are subject to an otherwise broad contractual hiring prohibition to those who worked on a particular project and who are current or recently terminated employees:
Exemplar C37-1
During the term of this Agreement and for a period of one (1) year thereafter, both Company and Contractor agree that neither party shall hire or solicit for hire the Personnel of the other party as an employee or independent contractor directly or indirectly through any third party, or otherwise use the services of the Personnel of the other party outside the scope of the business relationship between Company and Contractor without the prior written consent of the other party. For the purposes of this Agreement, “Personnel” is defined as any current employee and contractor of either party, as well as former employees or contractors, who are within 120 days of the date of their voluntary termination of employment or contracting work for either party and worked on projects related to Services.
Exceptions
In agreeing to a no-hire/no-solicit provision, the parties may find it beneficial to define what constitutes prohibited hiring and solicitation activity. As the following exemplars demonstrate, this is usually done by excluding certain activities from liability, such as general solicitation that does not target a specific employee:
Exemplar C37-2
During the Term of this Agreement, and for a period of one (1) year following the expiration or termination of Term, neither party shall solicit employees of the other party having performed under or in connection with this Agreement, without the prior written consent of the other party. A general solicitation to the public shall not be deemed to be a violation of this section.
Exemplar C37-3
Until the earliest of (a) the consummation of your acquisition of the Company pursuant to a Sale Agreement or (b) the date that is three (3) years from the date of this Agreement (the “Restricted Period”), you agree that, except with the express written permission of the Company, neither you nor any of your Representatives or affiliates will, directly or indirectly, (x) solicit or offer to hire or hire any members of senior leadership at the Company or (y) solicit or offer to hire or hire any salesperson, any person employed in the design and engineering of the Company’s products, or any employee who is a director or vice president or more senior position with the Company; provided, however, that the foregoing clause (y) will not apply to any employee who: (i) responds to any public advertisement or posting or other form of general solicitation that is not directed at any or all of the employees of the Company; (ii) responds to any solicitation by a bona fide search firm that has not been directed to solicit any or all of the employees of the Company; or (iii) was terminated by the Company at least six (6) months prior to commencement of his or her employment discussions with you or your Representatives without any encouragement by you or your Representatives, as the case may be. In addition, you agree that during the Restricted Period, none of you, any subsidiary of yours or any person acting on your or their behalf will encourage any customer or supplier of the Company to terminate or otherwise alter its relationship with the Company.
Exemplar C37-4
Contractor will not solicit for employment any of the Company’s management-level employees that are employed as of the date hereof to whom Contractor is first introduced in connection with its evaluation of the Proposed Transaction for a period of one (1) year from the date of this Agreement, provided, however, that Contractor is not prohibited from engaging in general solicitation for employees (including through advertisements or the use of search firms) or from soliciting or hiring (i) any such employee who contacts Contractor in response to a general advertisement or solicitation, (ii) any such employee that cont
Exemplar C37-5
For a period of two years following the Effective Date, each Party agrees not to, and agrees to cause its Representatives not to, directly or indirectly solicit for employment or hire any employee of, or consultant or other independent contractor engaged by, the other Party or any of the other Party’s affiliates to whom such Party or any of such Party’s Representatives may be directly or indirectly introduced or otherwise have contact with as a result of such Party’s evaluation of a Possible Transaction or the Confidential Information; provided that a Party’s general solicitation for employees or public advertising of employment opportunities (including through the use of employment agencies) not specifically directed at employees or independent contractors of the other Party or any of the other Party’s affiliates will not constitute a breach of the terms of this paragraph.
Exemplar C37-6
Both parties acknowledge that each has a substantial investment in their respective employees. In consideration of this investment, the parties agree that during the term of this Agreement and for a six-month period thereafter (regardless of the reason for termination), neither party may solicit for employment, retain, employ, contract, or make contact with any employee or consultant of the other without first receiving written consent from the other party. The foregoing restriction shall not apply to any employment through means of advertisement, job postings or job fairs that are conducted in the ordinary course of business or any employment where the individual has made the initial approach on an unsolicited basis.
Exemplar C37-7
Both parties acknowledge that each has a substantial investment in their respective employees and consultants. In consideration of this investment, the parties agree that during the term of this Agreement, and for a six-month period thereafter (regardless of the reason for termination), neither party may solicit for employment, retain, employ, or contract with any employee or consultant of the other who is providing or has provided services related to this Agreement (“Non-Solicitation Period”). Additionally, during the Non-Solicitation Period, CLIENT may not solicit for employment, retain, employ, or contract with any employee or consultant who was submitted by CONTRACTOR for any position with CLIENT. For purposes of this Agreement, “solicit” shall mean the direct targeting and seeking out of one party’s employees and shall not include general public solicitation notices (advertisements, job boards, etc.) or whereby employees of one party seek out the other party.
Exemplar C37-8
You hereby agree that, for a period of eighteen (18) months from the last disclosure made hereunder, neither you nor any of your affiliates (nor any of your Representatives on behalf of you or any of your affiliates) will, directly or indirectly, solicit, interfere with or endeavor to entice away, offer to employ or employ any of the current officers or employees of the Company or any of its affiliates with whom you have come in direct contact in connection with your evaluation of a possible transaction with the Company so long as they are employed by the Company or any of its affiliates, without obtaining the prior written consent of the Company; provided, however, that the foregoing provision will not prevent you from hiring any such person who (i) responds to a general advertisement for employment or (ii) contacts you, your Representatives or affiliates on his or her own initiative and without any direct or indirect solicitation by you or your Representatives.
Exemplar C37-9
During the term of this Agreement, neither Party nor its Affiliates shall directly solicit to hire (including through the use of third parties) any employee of the other Party who participated (or participates in the future) in meetings or discussions regarding the Purpose. However, notwithstanding the above, this paragraph shall not restrict the right of either Party to solicit or recruit generally in the media, and shall not prohibit either Party from hiring, without prior written consent, the other Party’s employee who answers any advertisement or who otherwise voluntarily applies for hire without having been personally solicited or recruited by the hiring Party.
Exemplar C37-10
Contractor and its affiliated investment partnerships will not solicit any of the Company’s employees for employment for a period of one (1) year from the date of this Agreement, provided, however, that Contractor is not prohibited from (i) hiring any such employee who contacts Contractor in response to a general advertisement or solicitation, or (ii) hiring any such employee that contacts Contractor on his or her own initiative.
Penalty
The parties may agree to a fixed penalty for any breach of a no-hire clause:
Exemplar C37-11
CLIENT and CONTRACTOR agree not to directly or indirectly employ or engage as an independent contractor any employee of the other party during the term of this Agreement and for a period of one (1) year thereafter without the prior written consent of the other party. Any party violating this paragraph will pay to the other party a fee in the amount of X% of the employee’s annualized compensation with the new employer.