Non-solicitation fees and other mystifying outsourcing contract terms

“What’s in a name? That which we call a rose by any other name would smell as sweet.”                     William Shakespeare, Romeo and Juliet

Why do law firms that outsource allow their outsourcing vendors to charge them for non-solicitation fees, or in some instances, charge for the severance pay of outsourced employees?

Non-solicitation fees–for the uninformed–are fees that clients pay to the outsourcing vendor in cases where they hire the vendors’ employees or if a third party (i.e. another vendor) hires them.  The argument is that the outsourcing company incurred “costs” to hire, train and manage these employees should, therefore, be compensated if the employees are hired away from them.  With the same logic and reasoning, some vendors are requesting severance pay for their employees if the client terminates their contract.

Really.  Isn’t this why law firms pay monthly management fees?  Isn’t this why firms outsource?  Those are the questions.

A few other questions our consultants ask when we are faced with a vendor requesting non-solicitation fees or severance during a contract negotiation are:

  • Do you guarantee that any employee I pay non-solicitation fees for  will stay in the new job for the life of the agreement?
  • Will you repay me these fees if they leave or are terminated during the agreement?
  • Where will you place these people if I don’t hire them? If they are placed somewhere then how is the vendor damaged?

If you get satisfactory answers to these questions, then by all means, pay the fees.  But you won’t.  Non-solicitation fees and severance are, in truth, hostage fees–just by another name, and not at all sweet.

The best strategy for your firm is to just say no to them in any future contract, no matter what language the vendor uses.

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2018-09-20T22:26:03+00:00