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Legal consequences if key employee leaves company, starts his own, and takes with him the best customers.

Jonesboro, GA |

One of my key employees who has direct relationship with my biggest customers might leave the company, start his own competitive company, and try to take with him those customers. What recourse would I have for his pirating of my customer base?

Attorney Answers 3

Posted

The most common way to protect against this is a comprehensive, but enforceable agreement containing certain restrictive covenants such as non-competition and non-solicitation. Absent that, you would have the right to protect your company's trade secrets if they qualify as such under Georgia law (possibly your customer list). And you may have a small claim if the employee began competing while still employed, but that would not stop him from competing after he has left. Otherwise, the general rule is that employees may freely compete after they have left employment.

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Jeffrey L. Cohen

Jeffrey L. Cohen

Posted

It might be too late in this case, but not necessarily. See an attorney in Georgia who can comment on whether this person has stolen confidential "trade secrets."

Posted

Sounds like you are operating without an employee agreement, as that would have spelled out what recourse you have and what limitations are placed on the "key employee". Where a marketing director, sales rep, or customer service person is concerned, there are trade secrecy obligations generally imposed, but they are rather limited if you did not take the routine business precaution of having a written employment agreement signed to cover this situation.

It is never too late to have that employment agreement prepared and signed, and you should do that at once. See a business attorney or intellectual property attorney, preferably one who has prior corporate legal department experience, to prepare a tight employee agreement. Get an attorney licensed in your state so the agreement complies with state law. If it is not done right, state law may invalidate the agreement making the whole exercise a wasted effort - which is why you need to use an attorney that knows those laws, which vary from state to state.

I am not your lawyer and you are not my client. Free advice here is without recourse and any reliance thereupon is at your sole risk. This is done without compensation as a free public service. I am licensed in IL, MO, TX and I am a Reg. Pat. Atty. so advice in any other jurisdiction is strictly general advice and should be confirmed with an attorney licensed in that jurisdiction.

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Posted

In the absence of a written employment agreement, you are probably out of luck, unless this key employee is misappropriating trade secrets. Customer lists are not usually considered trade secrets because the identity of your customers is probably not a secret. Even if you had a valid non-compete clause, courts are reluctant to enforce them and interpret them narrowly. Why? Because one of our fundamental values is to encourage competition.

Let's be practical---your best bet in this situation would be to work out a new deal with this key employee to keep him happy. Litigation is almost never successful in these situations. If your key employee wants to leave, or if his demands for additional compensation are excessive, then your best bet is to launch a counterattack---taking expedited steps to improve your existing relationships with key customers. In the final analysis, competition is usually a good thing.

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