Published on March 19th, 2013 by Alan L Sklover
Question: I’ve received a letter from an attorney of my former employer stating that I must “cease and desist from soliciting my client’s customers and salespeople.” I have started my own business and am in direct competition with my former employer.
Is it unlawful for me to walk into a business that my ex-employer sells to and make my own sales pitch?
Charleston, South Carolina
Answer: Dear Tom: As explained below, soliciting your former employer’s customers and even its employees, and competing with your ex-employer in every other way, is not “unlawful.” It is better described as “free enterprise,” “capitalism,” “sweet freedom,” and, among some people, “the best revenge.” (I am smiling right now.) Here are my thoughts:
1. TO START OFF, as I sometimes say, “Welcome to freedom.” You are entirely free to solicit your former employer’s customers and staff, and compete with your former employer in every other way . . . Our society fully supports freedom of enterprise, rewards those who come up with new and better ways of doing things, and prizes individual initiative. From General Motors to Apple Computer, pretty much every successful company started out the same way you are starting out. Oh, sure, former employers just hate the notion of a former employee beating them at their own “game,” probably because that is exactly how they started out, and they are concerned you may be quite successful. So, I say, “May the better person win. Just go for it!”
2. . . . BUT you are not legally free to do so if you have signed a valid and binding non-solicit or non-compete agreement . . . As you surely know, many employers require their employees to sign either (a) non-compete agreements that say, in effect, “I promise that for a certain time period I will not work for a competitor,” and/or (b) non-solicit agreements that say, in effect, that “I promise that for a certain time period I will not solicit this company’s customers or employees.” For a variety of reasons, many employers do not require their employees to sign them. If you are confident that you have not signed either kind of agreement, you are in a good, enviable position.
You might be interested in viewing our free 10-minute video on YouTube entitled “When Leaving, How to Take Your Colleagues with You.” To do so, just [click here.]
3. . . . AND when you leave your job you are not legally permitted to take with you customer lists, or any other valuable information or property of your former employer . . . Your former employer may be saying to himself or herself, or to his or her attorney, “I have heard that Tom is going around and trying to do business with my customers. He must have taken with him a list of them, and that is like stealing, isn’t it?” If you did take with you a list of your former employer’s customers, your former employer would be correct, because a list of customers is considered a trade secret in the law, and thus valuable property. As I sometimes counsel my clients, “Stealing trade secrets is worse in a legal sense than is stealing computers.” Taking a customer list with you is legally forbidden, whether it is in digital format, paper format, or any other format, even if you did not sign a non-solicit agreement or a non-compete agreement.
If you did, in fact, take a customer list with you when you left, even if it is simply at home where you work on the weekends, on your laptop computer, or in your Blackberry, left over from days when you worked from home, I would suggest you delete it, erase it, or otherwise destroy it, and stop using it, as soon as possible.
That said, there is nothing wrong with someone in your shoes from (a) remembering as many names of customers as you can, (b) looking up customers names and addresses on the internet or from phone books, or (c) buying a commercially-sold list of customer prospects that are available from “lead generation” of “mailing list” companies.
And please do not make the mistake of saying to your new customers “I know my former employer sold you these widgets for $1.78 each; I can sell them to you for $1.65 each.” That would prove that you have “confidential information” after you left your employer, and that you are using that “confidential information” to your benefit. That would almost prove you have done wrong, and thus should be carefully avoided.
4. . . . AND, TOO, you are surely not permitted to start contacting your former employer’s customers before you leave your job while working for your former employer . . . A significant error that some employees make when they are preparing to “go out on their own” is to – while still employed – contact customers of their soon-to-be former employer and tell them of their future plans, and ask them to send some of their business their own way when they leave their jobs. That would be (a) a breach of the duty of loyalty that all employees owe their employers while the employment relation is still ongoing, and (b) a potential reason for your employer to sue you to (i) recover what he or she paid you while you were in that way acting against your employer’s interests, and (ii) stop you from enjoying any “fruits” of your improper behavior, that is, selling more to those customers you prematurely and improperly solicited.
5. . . . SO, I heartily applaud your independent spirit, your true courage, and your now seeking information and insight about what you can and can’t do, especially when facing a nasty “Cease and Desist” letter . . . Assuming you have not acted improperly, I heartily applaud what you are doing: trying your hand at going into your own business. Over the last few decades, the advantages of being employed by others – including long-term compensation, possible equity in the company, job security and retirement benefits, all of which are slowly but surely disappearing – make self-employment an increasingly attractive option for many people. While being self-employed is not for everyone, you never know if it is for you until you try it.
You are wise to seek information and insight about how to do this, and to arm yourself with as much understanding, and thus empowerment, as possible. My hat is off to you!
6. . . . AND SO I suggest you consider sending what I call a “No, Mr. (or Ms.) Attorney, I am free to compete, and you can just go Cease and Desist yourself” letter to that attorney. The “Cease and Desist” letter you have received from your former employer’s attorney is intended to make you fearful. I sure hope that it is not successful in that respect, because most times there is no “bite” behind the “Cease and Desist bark.” This is especially the case if you have not – as described above – (a) signed a non-compete or non-solicit agreement, (b) taken customer lists with you, or (c) solicited customers of your last employer before you left your last job.
If you have done nothing wrong, you have nothing to fear, and you face two choices before you: (1) to ignore the attorney’s “Cease and Desist” letter, or (2) to respond to it, and with gusto.
In general, I do not like my clients to ignore such attorney letters, because it can seem to others – or be made to seem to others by crafty attorneys – that you are “proven guilty by not having defended yourself.” It is possible that, some day, that attorney will say to a Judge or even a Jury, “Wouldn’t you have responded to such a letter if you were truly innocent of wrongdoing?” and some might say to themselves “Yes, I sure would have.” I prefer to have clients respond to “Cease and Desist” letters with “Cease and Desist Letters” of their own that explain, in effect, that “I have done nothing wrong, signed any agreements, stolen any information, or solicited any customers before I left my last employer. So, my former employer has no right to interfere with my new life as a businessman.”
If you are interested in obtaining a Model Letter Responding to An Attorney’s Cease and Desist Letter that you can use to adapt to your own facts, that shows you “What to Say and How to Say It”™, just [click here.]
Tom, I know that I have expressed many thoughts in this answer, but I do hope that this makes sense to you. Go forward, and prosper, and don’t let attorneys scare you. It sounds to me like you will do just fine.
My Best to You,
P.S.: We also offer a 185-Point Master Guide and Checklist to Non-Compete Agreements for use by those who face demands that they sign non-competition agreements, and those who signed them and now must deal with the consequences of their doing so. To obtain a copy, for your understanding and Peace of Mind, all you need to do is just [click here.]Delivered by Email – Instantly!
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