Published on August 26th, 2015 by Alan L. Sklover
Question: My husband was recently fired from his job. He never signed a non-compete or a non-solicitation agreement. We decided to start our own business in the same kind of business as his employer was in, because that is what my husband knows best. I own it; he does most of the work. No client list was ever taken or anything like that.
Since we started the business, we gained some of the clients of his former employer. Are we doing anything wrong or illegal? We have not heard from his former boss, but we are concerned that we will.
Answer: Dear Teresa: Simply put, and legally speaking, you seem to be “in the clear.”
1. We live in a society that espouses, and usually permits, “free enterprise.” Generally speaking, each person in our society is free to try to become a business person, so long as what they are doing does not violate any laws or contractual obligations to another person. The reason I write “usually permits” is that, while all business people espouse free enterprise, so many business people – from both large companies and small – seem to want to stifle, prevent or stop any one who competes with them, and especially former employees, and so they will sometimes do all they can to prevent or stop that from happening.
2. No non-compete agreement?; then you are free to compete. It is just that simple. If you are not violating a legal obligation by competing with your former employer, you can’t be legally forced to refrain from doing so.
But here is a potential exception: if you and your husband began to compete with his former employer BEFORE your husband was fired by the company, then in that case, you and he could be accused of violating his duty of loyalty to his then-employer, and legally could possibly be stopped from continuing to do so in your own business.
Our 185-Point Master Guide & Checklist to Non-Competition Agreements is a perennial favorite. It takes you step-by-step through everything you need to know. To obtain your copy, just [click here.] Delivered by Email – Instantly!
3. No non-solicitation agreement?: then you are free to solicit. The analysis in the paragraphs above concerning non-compete agreements is the same analysis for non-solicitation agreements: If you did not sign a non-solicitation agreement, you are free to solicit clients and customers to do business with you, and even employees to come to work for you.
One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Non-Compete Package” consisting of six Model Letters/Memos for non-compete navigation and negotiation, plus our “185-Point Non-Compete Guide and Checklist.” To obtain a complete set, just [click here.] Delivered by Email – Instantly!
4. No stolen secrets or theft of other confidential information?; don’t worry – you don’t have to get amnesia. Many people ask, “But what if I learned a lot of things while I worked for my former employer, and have not forgotten them, like the names of many of their customers?” The law says that you don’t have to get amnesia when you leave a job. Information that is available to the public, and other generalized information is not considered “confidential” or “trade secrets.” The rule to use here is “the rule of reasonability,” meaning “Just don’t steal a computerized list of customers, and you’ll be just fine.”
5. If, nonetheless, you are threatened by your former employer (or its attorney), don’t fret; respond in simple, written fashion. Even when you have done everything right, and nothing wrong, sometimes people try to intimidate you into doing what they want you to do, or not doing what they don’t want you to do.
If you receive a “Cease & Desist” or other letter threatening you, and accusing you of doing some things wrong, don’t fret. What you need to do is respond to it (a) in writing, (b) clearly, (c) explaining that you did nothing wrong, and (d) stating that the letter seems to have no basis in fact, reality or the law, and thus is a form of illegal harassment.
Many people and their lawyers will sometimes use tactics like this to halt totally legal competition. Don’t fall prey to it if your former employer or its lawyer tries this. As Winston Churchill said during World War II, “We have nothing to fear but fear, itself.”
We offer a great Model Letter entitled “Response to Attorney’s ‘Cease and Desist’ Letter Alleging Non-Compete Violation.” It shows you “What to Say, and How to Say It.™” To obtain a copy for your adaptation and use, just [click here.] Delivered by Email – Instantly!
Teresa, thanks for writing in. Hope this is helpful. Best of luck in your new business. Remember that “Success is the best revenge.”
P.S.: Did you know that, if you enroll as a SkloverWorkingWisdom Member you get a 10% discount on ALL OUR MODEL MEMOS AND LETTERS? . . . No charge. No obligation. No kidding. Just [click here.] Delivered by Email – Instantly!
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