Soliciting the customers of your former employer is just one of the things that could land you in hot water. An attorney outlines other scenarios and what not to do.
“Wanting to learn the ropes from our employer and go out on our own is something that many employees consider,” observes Southern California attorney Glenn Dickinson (opens in new tab). “If you go about it the right way,” he adds, “a new, exciting and successful chapter can open in your life. That is the beauty of our American system of competition. But you’ve got to be aware of what not to do.”
And that’s our focus in today’s story — leaving an employer, going out on your own and the consequences of doing it all wrong.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.
I asked Dickinson to list and explain the things that can result in a lawsuit. So, if you (or someone you know) are considering leaving your current employer and setting up your own shop, his advice will reduce the chances of winding up on the wrong side of a lawsuit. Here’s what NOT to do:
1. Be sneaky! Before informing your employer that you are leaving, tell your customers and ask them to give you their next order because, “I’ll give you a much better price.”
Employees owe a duty of loyalty to their employer, so if you are sneaky and customers follow you, now you’ve got a legal problem, as this is not only a breach of that duty, but it can be unlawful under other laws.
However, you can avoid being sneaky by respecting the correct sequence of events with who you tell, beginning with your employer. Then, you can tell customers and fellow employees. In your business life, you’ve got to start with the employer.
2. Aggressively target customers of your former employer, solicit their business and think of them as “your” customers rather than those of your former employer.
This is false reasoning, as the customer isn’t yours. Rather, they have a legal relationship with your former employer.
The rule in many states is that you are free to send an announcement about your new employment, but you cannot send a solicitation. An “announcement” is bare bones: As of (date), this is my new contact information. A “solicitation” is anything that invites placing an order.
If your new employer has a pre-existing mailing list that is independent of any information they acquired from you, they can send out a solicitation to anyone in their database, as well as an announcement that you are now working for them. If the customer list happens to include customers of your former employer, that’s OK — as long as those contacts didn’t come from you.
3. Take stuff with you when you leave.
You’ll want to “empty your pockets” of everything you obtained from your former employer, whether it is physical paper, e-mails, contacts on your phone or files or folders on your computer. You need to sterilize yourself of any information you have received.
You must purge customer information from your personal phone. You must be sure that you do not walk away with any information that belongs to the former employer.
4. Look suspicious, not transparent.
One of the great drivers of litigation is the unknown. If your former employer suspects that you are up to no good — doing unlawful things — and they can’t find out what you are really doing, then they are more likely to file a lawsuit because they are suspicious.
So, be transparent: If you get a demand letter or a cease-and-desist letter, it gives you the opportunity to respond in a professional, thorough and transparent way. This is where hiring a lawyer can be extremely important.
When you get one of these “nastygrams” from a former employer and you hire a lawyer to respond, it sends two very clear messages: First, “I am taking this seriously.” Second, it tells them you have informed yourself on the requirements of the law.
This is a specialty area of the law with its own unique features and particular rules. So a general business attorney might not be the best person to speak to. You would need a litigator experienced in trade secrets and unfair competition.
A response letter from a lawyer who knows what they are talking about says that the former employee is getting good advice.
An Ounce of Prevention Goes a Long Way
Dickinson concluded our interview by recommending something that can be tremendously valuable if problems arise, and that is, “Before leaving, meet with a lawyer familiar with these areas of the law and walk through the do’s and don’ts. It’s not guaranteed to keep you out of a lawsuit, but it makes one more defensible, as you can say, ‘I sought legal counsel. I tried to do it the right way.’ In that situation, the lawsuits tend to end quickly on reasonable terms.”
After 30 years as a litigator, Dickinson’s focus “is to keep people out of court, and I often tell clients, ‘The secret of happiness is not winning lawsuits! The secret of happiness is staying out of lawsuits!’”
Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com (opens in new tab).
-
-
CrowdStrike Stock Is a Screaming Buy, Wall Street Says
Analysts say CrowdStrike (CRWD) is on deep discount after shares plunged following disappointing guidance.
-
ADP: Hiring Slows in November to a Nearly Two-Year Low
The November ADP report showed that job growth is starting to cool in response to the Fed's efforts to fight inflation.
-
How Parents Can Teach Their Kids About Cryptocurrency
Starting with explaining the concept of money to begin with can help them grasp the concept of digital currencies.
-
How Do You Overcome Stage Fright? These 6 Tips Can Help
Many people fear public speaking more than they fear death, yet advancing professionally could depend on whether you make a good impression when you step up to the microphone.
-
2 Ways Retirees Can Defuse a Tax Bomb (It’s Not Too Late!)
If you’re retired and find yourself sitting on a “tax bomb,” you may think there’s nothing you can do. But two strategies could seriously reduce your taxes in retirement.
-
5 Trends in High-Net-Worth Philanthropy
Wealthy families and organizations are giving more to charity but also targeting funding to fewer grants in their efforts to create bigger impacts.
-
6 Ways a DAF Can Make Your Year-End Giving Better Than Ever
Giving appreciated assets instead of cash could be the most tax-smart move you can make with a donor-advised fund, but wait, there's more…
-
Life Insurance Strategies to Consider When You Own a Family Business
Not only can life insurance replace lost income, but it can help with estate taxes and provide a sense of fairness for family members who don’t participate in the business.
-
Short-Term Investments to Protect Against Inflation and Market Volatility
Rates on Series I savings bonds, T-bills and fixed annuities are all above historical averages and could serve investors well during turbulent times like these.
-
What’s the Difference Between Average and Actual Rate of Return?
An average rate of return can mask losses over time, so what investors really want to keep an eye on is the actual rate of return.
