ACTUAL CASE HISTORY: Phil, a successful stockbroker, had been with his firm for eight years. At 44, he had built up a “book” of business that was very, very valuable. He’d developed his client list over 20 years, at three companies, and he had many clients with seven-figure investment portfolios. An unsolicited employment offer came during lunch with a stockbroker friend, an offer that Phil had a hard time refusing: it would probably set him up for the rest of his career, and enable him to take the early retirement he and his wife had always wanted.

Phil decided to take the offer, and set about making the necessary arrangements. First, he called his most important clients, to tell them of his decision and to request that they transfer their accounts when he goes. Then, he had his two assistants print out all of the client information he’d need to fill out the client account forms at his new firm. Third, he directed certain mutual fund companies he did a lot of business with to hold off on forwarding his checks, because he’d be giving them a new address shortly. Lastly, Phil gave his branch manager the news that he’d be leaving at the end of the month.

Things didn’t take long to happen. The next morning, when Phil arrived, he was asked to attend a meeting at Human Resources, where he was confronted with the steps he had taken. He readily admitted them, as he saw nothing wrong with what he’d done. “After all,” he responded, “most of these clients I, myself, brought to this firm.” And the rest were people he, himself, had targeted and brought in using his own time and effort. That included dinners, golfing and even vacationing, all on his own time.

Phil was summarily fired, and a letter was sent to his next firm threatening a lawsuit. That resulted in his being asked by the new firm to “wait a while, until things cooled down, perhaps a month or two” before coming on board. Finding themselves without Phil, as he had no firm from which to service his clients, many of his clients simply proceeded to find other brokers, The “month or two” stretched into six full months, during which Phil lost a great part of his business, and even when he came to the new company, he had to settle the claims of his old company with nearly a full year’s compensation paid to them. It wasn’t what he’d expected.

LESSONS TO LEARN: No one really “owns” clients. Clients are free to be served by anyone they choose. But employer’s own two “aspects” of clients that employees simply cannot take with them: the first is client information. You simply cannot take client information out of your firm: that’s theft. That includes names, addresses, telephone numbers, email addresses, social security numbers and birth dates. That information is valuable; taking it is like taking computers. Simply, it’s theft.

Incidentally, that includes information about the client that you have, yourself, brought to your employer. If you have a rolodex full of valuable information, don’t take it into the office; take only copies, and leave the originals home.

The second aspect of the client that your employer “owns” is the good will of that client, in effect, the relationship between the client and the firm. While you are an employee, you owe a duty of loyalty to your employer, including a duty not to do anything to harm the firm’s relations with clients. Provided, of course, that you have no “non-compete” agreement with your firm, after you leave the firm’s employment, you are entirely free to offer your services, or the services of your new firm, to that client.

After you leave, you’re free to compete, that’s simply “free enterprise” at work. But even here be careful: you’re not free to openly criticize your old firm, only to offer the good services of your new, “better” firm.

Even if you’ve built your book of business, leaving with that “book” is very tricky, and these days, needs to be done with care. Consider having an employment attorney guide you through any such transition. Remember what happened to Phil.

WHAT YOU SHOULD DO: If moving from one firm to another, and you haven’t signed a “non-compete” agreement:

  • Take your personal rolodex home, leaving a copy at the office.
  • Don’t take home any written information about your clients.
  • At home, you may try to remember who your clients were, and how to contact them: that can’t be denied you.
  • Don’t make the mistake of thinking that colleagues or subordinates will keep your secrets. You can probably presume the opposite.
  • Don’t tell customers of your intentions, or ask their commitment to leave with you; contact them after your old employment is over.
  • Be upfront with your new employers about all of your facts and your concerns, and ask them for written assurances that you will be able to begin immediately, even if a “cease and desist” letter is received.
  • Consider asking your new employer to “defend and indemnify” you in case your old employer sues you.
  • Since your old firm may, for various reasons, not pay you promptly your final monies due you, be prepared with extra resources to tide you over until your new firm starts paying you.
  • Finally, consider the wisdom of using an experienced employment attorney to guide you through your transition.

If you would like to obtain a “model” memo or a detailed checklist to help you resign from your job [click here].