Understanding Your Staffing Firm’s Non-Compete Agreement

If you’re a staffing professional, it’s likely that at one time or another you’ve considered leaving your company to start your own staffing business. You work hard for a paycheck but know that there is no assurance of a big future or financial security. You’re excited to explore becoming an entrepreneur but your non-compete and non-solicitation clauses loom.

Well, maybe not so much. Of course we recommend that you seek legal advice or counsel from a law firm and that you respect any agreements you’ve made…however you may find that your non-compete doesn’t hold back your entrepreneurial dream.

If you’re wondering how to start a staffing firm with a non-compete in place, the good news is that there may be more flexibility than you think. And knowing your rights and restrictions is a smart first step.

What is a Non-Compete or Non- Solicitation Agreement?

A non-compete or non-solicitation agreement is a legally binding employment contract under which an employee agrees to not enter into or start a similar profession or trade in competition against their employer or former employer.

When an employee signs a non-compete, they are agreeing to not directly or indirectly solicit former clients or reveal any trade secrets learned during employment for a specified period of time.

The use of non-solicitation agreements is not a new practice, however, very few employees understand the implications of non-compete clauses until they leave a company. Rules vary widely by state, which is why knowing your local laws is essential before taking any action.

Why Do Non-Compete Agreements Matter in the Staffing Industry?

Non-compete agreements are especially common—and contentious—in the staffing and recruiting industry. Why?

• Protects client relationships and proprietary business methods: Employers want to protect the relationships and processes they’ve built.
• Designed to limit unfair competition: but can be overreaching: Some agreements are broader than necessary and may not hold up in court.
• Understanding terms early can save you legal and financial headaches: The time to learn what you’ve signed is before you make a move, not after.

Here are a few things to know on how to start a staffing agency with a non-compete:

1. 1. YOUR STATE MATTERS

Many states, regardless of a document that prohibits your professional activities, may not enforce non-competes or competition agreements. For example, many states have statutes or court rulings that determine what constitutes a reasonable amount of time for a non-compete and may not enforce those whose duration is considered unreasonable. Alternatively, if your company does not have a “legitimate business interest” for the non-compete, a court may not enforce it. Such interests include protection of trade secrets or relationships with prospective or existing customers.

1. 1. • States like California and North Dakota generally ban non-competes
      • States like Texas, Florida, and Ohio may enforce them if deemed “reasonable” in scope and duration
      • Always verify with an employment attorney licensed in your state

   2. GEOGRAPHICAL AREA

The majority of non-competes have geographical restrictions that may or may not be an issue. Courts have always tried to strike a balance between the interests of the former employer and the former employee or independent contractor (you). Generally, courts look to whether the restricted area is coextensive with the area in which the employer is doing business.

1. 1. • Geographic scope may be harder to define for remote or hybrid work
      • Some agreements restrict by state, city, or mile radius from clients
      • Courts may strike down “overly broad” territory clauses

   2. TIME LIMITS AND DURATION OF RESTRICTIONS

One of the most enforceable elements of a non-compete is the length of time you’re restricted from competing.

1. 1. • Common timeframes range from 6 months to 2 years
      • Shorter durations are more likely to be enforced
      • Track your end date so you can plan client outreach after expiration

   2. YOUR CUSTOMERS

Most non-competes aim to prevent departing employees from taking existing clients or leads with them. Even if you leave the company, you may still be restricted from contacting customers you worked with directly.

1. 1. • Avoid direct or indirect solicitation until agreement ends
      • Keep detailed notes of pre-existing relationships you had before employment
      • Consider targeting a different industry or client size during restricted period

   2. NON-SOLICITATION VS NON-COMPETE — KEY DIFFERENCES

Not all restrictions are created equal. Here are the key differences in a non-compete vs non-solicitation agreement:

1. 1. • Non-compete: Limits your ability to operate a similar business in a defined region or timeframe
      • Non-solicitation: Prevents you from contacting specific clients or recruiting former coworkers

Understanding both is critical before launching your own firm.

1. 1. NEGOTIATE

If you are coming from an independent company, the owner (an entrepreneur) may understand your desire to be an entrepreneur as well. Many times, staffing professionals have reached their peak both professionally and financially and your company simply does not possess the resources to retain you. Communicate with your boss and you may be surprised.

1. 1. • Propose a shorter restricted time in exchange for other concessions
      • Offer to avoid certain clients or regions as part of the agreement
      • Get all negotiated terms in writing

   2. SEVERANCE PAY

This is tied into negotiating. Perhaps your company is having financial trouble or having tax or insurance troubles. If you are willing to forego severance pay it may buy you out of your non-compete. You may be doing your boss a favor! Most staffing professionals who become owners are earning more in their second or third year than they did in their former position, sometimes sooner. Severance pay may be tempting but could cost you more in the long term.

1. • Evaluate long-term earning potential vs short-term severance
   • Consult an attorney before signing severance tied to non-compete release
   • Be sure there are no additional hidden restrictions

Steps to Take Before Launching Your Staffing Firm

Starting a staffing firm with a non-compete doesn’t have to be a legal minefield. Here’s how to stay smart:

• Review your agreement with a lawyer
• Choose a niche or location outside restricted areas
• Develop your brand and business plan while still compliant

Understanding and navigating your non-compete isn’t about breaking rules—it’s about starting your staffing agency in a compliant, strategic way that avoids costly disputes. With smart planning and legal guidance, your entrepreneurial goals don’t have to wait.

FAQs: Staffing Non-Compete Agreements

Q: Can I start a staffing agency if I have a non-compete?
A: Yes, depending on your agreement and state laws. Consult a lawyer before making any moves.

Q: How long do non-competes usually last in staffing?
A: Most range from 6–24 months. Shorter timeframes are more likely to be enforced.

Q: What states do not enforce non-compete agreements?
A: California, North Dakota, and Oklahoma largely prohibit them. Other states vary.

Q: What’s the difference between a non-compete and a non-solicitation clause?
A: A non-compete restricts your ability to run a business; non-solicitation limits contact with clients or employees.

Q: Can I negotiate my non-compete before leaving my employer?
A: Yes. Many staffing professionals successfully negotiate shorter terms or exclusions—just get it in writing.

Q: Does remote work change non-compete enforcement?
A: Possibly. Courts are still catching up, but overly broad geographical terms may be harder to justify in remote roles.