By Jeff Salton
If you have reason to believe an employee might resign and ‘poach’ your clients, what can you do legally to stop it from happening?
Contractual clauses that seek to restrict an employee earning a livelihood after they leave your employment are prima facie unenforceable. You have to show the restraint provides reasonable protection for a recognised business interest (yours) in order to enforce a post-employment contractual restraint.
You can impose a non-solicitation restraint upon a former employee to protect customer relationships, provided its period of operation is reasonable. A reasonable period is the time needed to introduce a replacement employee to those clients so they can re-establish a connection with your business and thereby protect your goodwill.
An example of a non-solicitation restraint: “Upon termination of the employee’s employment for any reason whatsoever, he will not, without the written consent of the employer, solicit any of the employer’s clients that he had dealings with during his employment.”
In Entello Pty Ltd v Firooztash (11 March 2016), a financial planning and investment advisory business obtained a Court order to enforce a six-month non-solicitation restraint against an advisor after he left the firm.
What solicit means in the eyes of the law
The Court ruled that ‘solicit’ means ‘to ask for business’. An employee can solicit your clients even if they do not telephone, email or arrange to meet them to discuss business.
For example, there is solicitation of a client by a former employee if the former employee in substance conveys the message: “I am ready and willing to deal with you and encourage you to do so.”
If one of your clients asks your ex-employee what has to be done to get him to act for them, and your ex-employee replies that they would need to give him a letter of appointment to his new employer, that would be solicitation.
Would you know what to do if one of your employees that deals directly with your clients resigned tomorrow?
Would you know how to stop them from ‘poaching’ your clients that you’ve worked so hard to garner in the first place?
If they resign, how much notice do they need to give? Can you ask them to run down their leave entitlements? Can you place them on ‘gardening leave’?
What if they don’t want to serve out their notice period or refuse to carry out their obligations?
Sounds like you might need some help.
The Portner Press Employment Law Handbook, written by the workplace law experts at Holding Redlich, has all the information you need to ensure that resignations are lawful and that your business’s interests are protected.