Non-Compete vs. Non-Solicitation Agreements: Key Legal Differences

A non-compete agreement generally restricts where or how a former employee can compete with an employer after leaving the company. A non-solicitation agreement is narrower. Instead of preventing someone from working for a competitor, it typically restricts the former employee from soliciting certain customers, clients, or employees of the business. 

The distinction matters when you are hiring employees, protecting customer relationships, or reviewing restrictions before changing jobs. A provision that is broader than necessary may create enforcement problems, while an agreement that is too limited may not protect the business interest the employer intended to address. 

At Howell Law, we assist businesses and professionals with employment agreements, restrictive covenants, and other commercial agreements. From our office in Charlotte, North Carolina, we can review existing terms or help prepare agreements based on the circumstances of the business relationship. Contact us to schedule a consultation. 

What Is a Non-Compete Agreement? 

A non-compete agreement limits certain competitive activities after an employment relationship ends. Depending on its language, it may restrict an employee from working for a competing company, starting a competing business, or performing certain competitive work for a specified period or within a particular geographic area. 

North Carolina courts apply specific requirements when deciding whether to enforce a non-compete agreement. An employment non-compete generally must be in writing, be part of the employment contract, be supported by valuable consideration, contain reasonable time and territorial restrictions, and protect a legitimate business interest of the employer. 

A restriction that prevents a former employee from performing work that does not meaningfully compete with the former employer's legitimate business interests may be too broad. Careful drafting matters because North Carolina courts generally cannot rewrite an overly broad restriction simply to make it reasonable and enforceable. 

What Is a Non-Solicitation Agreement? 

A non-solicitation agreement usually focuses on particular business relationships rather than preventing competition altogether. For example, it may prohibit a former employee from contacting certain customers to persuade them to move their business to a new employer. 

Some agreements also address employee solicitation. These provisions may restrict a departing employee from recruiting former coworkers to join another business. 

Because non-solicitation provisions focus on specific business relationships, they are often narrower than non-compete agreements. However, their scope still matters. North Carolina courts may decline to enforce restrictions that extend beyond the business relationships an employer has a legitimate interest in protecting. 

Our business and contract law attorney can review the people and relationships your business needs to protect and determine how to address those concerns in an employment agreement. We can also review an agreement presented to you and explain the practical effect of its restrictions before you sign. 

The Main Difference Is the Activity Being Restricted 

The main difference between these agreements is what they restrict after an employment or business relationship ends. A non-compete focuses on competitive work, while a non-solicitation agreement focuses on certain business relationships. 

• A non-compete limits competitive work: It may restrict your ability to work for certain competitors, establish a competing company, or perform specified competitive activities. 

• A non-solicitation provision limits solicitation: You may still be able to work for a competitor, but the agreement may prevent you from approaching certain customers, clients, or employees. 

Consider a salesperson who leaves one company and accepts a position with a competitor. A non-compete could potentially restrict the salesperson from taking that position or performing certain competitive work.

A customer non-solicitation provision may allow the new job but prohibit the salesperson from soliciting customers covered by the agreement. That difference can affect an employer's protections and an employee's future work options. 

How North Carolina Treats Restrictive Employment Agreements 

North Carolina does not treat every restriction on post-employment competition as automatically enforceable. Agreements that limit a person's right to do business in the state must be in writing and signed by the person agreeing to the restriction.

For employment non-competes, courts also consider whether the agreement is supported by valuable consideration, reasonable as to time and territory, and designed to protect a legitimate business interest. 

"Consideration" means something of legal value exchanged for the agreement. When an employee agrees to a non-compete after employment has already begun, North Carolina courts generally require new consideration to support the agreement. 

Scope also matters. A restriction may be unenforceable if it extends to activities that do not meaningfully compete with the employer's legitimate business interests. North Carolina follows a limited "blue-pencil" rule. A court may decline to enforce a distinctly separable part of a covenant in some circumstances, but it generally cannot rewrite the agreement to create a reasonable restriction that the parties did not make. 

Non-solicitation provisions also require careful drafting. Enforceability depends on the wording and scope, including the customers, employees, or other business relationships covered by the restriction. 

Does the FTC Ban Non-Compete Agreements? 

No nationwide Federal Trade Commission (FTC) rule currently bans employment non-compete agreements. The FTC adopted a rule in 2024 that would have broadly prohibited non-competes. A federal district court later struck down the rule. The FTC currently states that its Noncompete Rule is not in effect and is not enforceable. 

That does not mean every non-compete is enforceable. State law remains important, and an agreement's specific language and circumstances can determine whether a restriction is enforceable. 

Which Agreement Should a Business Use? 

The answer depends on what the business needs to protect. A broad restriction on competitive employment may not be necessary when the primary concern is preserving specific customer relationships or preventing solicitation of key employees. 

Before drafting either type of agreement, consider the employee's role, customer relationships, access to sensitive business information, geographic market, and the business interests that could be affected after the employment relationship ends. Your business contracts should address the actual concern rather than impose restrictions simply because they are commonly used in employment agreements. 

We can review your business needs and determine which restrictions may be appropriate for your employment agreements. We can also draft or revise non-compete and non-solicitation provisions with the applicable legal requirements in mind. 

Discuss Your Restrictive Covenant With Our Attorneys 

Non-compete and non-solicitation agreements serve different purposes. A non-compete generally restricts certain competitive activities, while a non-solicitation provision focuses on efforts to solicit specified customers, clients, employees, or other covered business relationships. In either case, enforceability depends on the agreement's wording and the applicable law. 

At Howell Law, we help employers, business owners, and professionals review and prepare employment and business agreements. Based in Charlotte, North Carolina, we serve clients throughout Mecklenburg County, Catawba County, Union County, Cabarrus County, Gaston County, Lincoln County, Stanly County, Rowan County, Davidson County, as well as in Georgia.

We can review the restrictions in an existing agreement or help prepare provisions that address your business concerns. Contact us today to schedule a consultation.