Soliciting clients from your former employer is just one of the things that could land you in hot water. A lawyer describes other scenarios and what not to do.
“Wanting to learn the ropes from our employer and go out on their own is something many employees consider,” observes Southern California attorney Glenn Dickinson. (opens in a new tab). “If you do it the right way,” he adds, “an exciting and successful new chapter can open up in your life. That’s the beauty of our American competitive system. But you have to be aware of what not to do.
And that’s our focus in today’s story – leaving an employer, going out alone, and the consequences of doing everything wrong.
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I asked Dickinson to list and explain the things that can result in a lawsuit. So if you (or someone you know) are considering quitting your current employer and starting your own shop, his advice will reduce the chances of finding yourself on the wrong side of a lawsuit. Here is what NOT TO DO:
1. Be sneaky! Before telling your employer you’re leaving, tell your customers and ask them to place their next order with you because “I’ll give you a much better price.”
Employees have a duty of loyalty to their employer, so if you’re sneaky and customers follow you, you now have a legal problem, because that’s not only a breach of that duty, but it may be illegal under other laws.
However, you can avoid being sneaky by sticking to the correct sequence of events with whom you say it, starting with your employer. Then you can tell clients and co-workers. In your professional life, you must start with the employer.
2. Aggressively target your former employer’s clients, solicit their business, and view them as “your” clients rather than your former employer’s.
This is a fallacy, because the customer is not yours. Rather, they have a legal relationship with your former employer.
The rule in many states is that you are free to send an announcement about your new job, but you cannot send a solicitation. An “announcement” is simple: As of (date), here are my new contact details. A “solicitation” is anything that invites you to place an order.
If your new employer has a pre-existing mailing list that is independent of any information they have obtained from you, they can send a solicitation to anyone in their database, along with an announcement that you are now working for him. If the client list includes clients from your former employer, that’s okay, as long as those contacts aren’t from you.
3. Take things with you when you go.
You’ll want to “empty your pockets” of everything you got from your old employer, whether it’s physical paper, emails, contacts on your phone, or files or folders on your computer. You must sterilize yourself from any information you have received.
You need to purge customer information from your home phone. You must ensure that you do not walk away with information belonging to the former employer.
4. Look suspicious, not transparent.
The unknown is one of the big drivers of litigation. If your former employer suspects you’re doing illegal things and can’t figure out what you’re actually doing, they’re more likely to take legal action because they’re suspicious.
So be transparent: if you receive a formal notice or letter of formal notice, this gives you the opportunity to respond in a professional, thorough and transparent manner. This is where hiring a lawyer can be extremely important.
When you receive one of these “nastygrams” from a former employer and hire an attorney to respond to it, it sends two very clear messages: One, “I take this seriously.” Second, it tells them that you have educated yourself on the requirements of the law.
It is a specialized area of law with its own particular characteristics and rules. So, a general business attorney may not be the best person to talk to. You would need a litigator experienced in trade secrets and unfair competition.
A response letter from a lawyer who knows what they’re talking about says the former employee is well advised.
An ounce of prevention goes a long way
Dickinson concluded our interview by recommending something that can be extremely helpful if issues arise, namely, “Before you go, meet with a lawyer who knows these areas of law and go over the do’s and don’ts. It’s not guaranteed to keep you out of a lawsuit, but it does make one more defensible, as you can say, “I asked for a lawyer.” I tried to do it the right way. In this situation, lawsuits tend to end quickly on reasonable terms.
After 30 years as a litigator, Dickinson’s goal “is to keep people out of court, and I often tell my clients, ‘The secret to happiness isn’t winning cases! The secret to happiness is to stay out of pursuit!”
Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or emailed to Lagombeaver1@gmail.com. And don’t forget to visit dennisbeaver.com (opens in a new tab).
This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SEC (opens in a new tab) or with FINRA (opens in a new tab).
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