Basic Training: Can Employees Legally Take Your Clients?

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on August 1, 2013 in Employee Issues

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Your employees can become your next competitors if you don’t handle the relationship carefully . . . and by “carefully,” I mean having non-solicitation agreements and other understandings (in writing!) with your employees.

But some folks are “old-school,” or don’t want to spend the money.  As a result, their employees are considered working “at-will” and free to leave at any time.  From the perspective of the soon-to-be entrepreneur, can you take your employer’s clients?

Q:  We’ve been working for a company for more than a decade and have finally reached the point where we want to set up our own shop in the same industry. Most of the client relationships are with us, as the owner is very hands-off and many people don’t like him. We have no employment contracts. One of our concerns was transferring clients, specifically when is the earliest we could advisably do that? We’ve been moving forward with our plans, but we’ve realized that it would be far more practical for ourselves and for the clients, who otherwise could feel at sea, to be able to speak with them in advance.  How can we do so?

A:  While I appreciate your concerns about leaving clients “at sea,” employees do have a duty of loyalty to their employers in that you should not solicit clients, take files, etc., while still on the job (you can take your contact database), nor should you use “company property” (company phones, computers or make the announcement at a client  meeting or during your workday).

Best (safest) way to handle it is to get your ducks in a row, leave Friday afternoon, and contact everyone after you’ve left.  Do not use your work e-mail for these kinds of conversations. The longer the time delay between leaving your job and contacting the clients, the stronger your defense to a lawsuit that you took clients on company time.

Another way would be to contact clients on your own time (again, from your homes and not during workdays or hours) to let clients know you’re leaving and that you’ll be back in touch in a week or so to let them know where you’ve landed.  Two problems with that approach:  1. The client may want more information than it’s appropriate to give at that time . . . so if you’re concerned about their being “at sea,” that could leave them even more worried about how and when their needs will be handled; 2. There is a meaningful risk that if any of the clients lets the owner know (even inadvertently) that you’re leaving before you tell him, this could be bad for you and give the owner something to hang his hat on in litigation–whether or not you have an employment agreement).

A few more things to consider:

  • Will your clients really be “at sea”–are they that fragile?–if they are notified after you leave?  It’s really so much cleaner if you can wait.
  • Check the client agreements to make sure that there are no non-solicitation or exclusivity provisions in their contracts–for example, that if they are solicited by another agency (or by former employees of the agency), they’ll give the owner prior notice.
  • Depending on the clients’ feelings of loyalty to the owner–if you tell them before you tell him, they might be put off in the sense of your not acting totally aboveboard and with integrity.  More of a character issue and their feeling of trust working with you going forward than a legal issue.

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