Taking clients to a new job: Know your post-exit rights
Imagine this scenario: you’re in a job that you once loved, or at least enjoyed. But now you’re tired of it and particularly fed up with your boss. You start to look elsewhere, read your employment contract, and then you alarmingly discover that you’re somewhat stuck.
Yes, you’ve got some rather nasty post-termination restrictions in your contract. They may prevent you from trying to solicit (poach) clients or staff for a certain period – or deal with clients, whether you poach them or not. Worse still, you could be prohibited from going off to work for a competitor.
The real problem is that prospective employers usually expect senior executives, especially in client-facing roles, to have a following. But if you are precluded from tapping up clients that you’ve been working with, what are you supposed to do?
The law
The general rule is that post-termination restrictions, often known as restrictive covenants, are only enforceable if they are reasonable and go no further than necessary to protect the legitimate interests of the business. Whether the specific clause is enforceable will depend on the circumstances. Factors which may be relevant might include the type of business involved, the seniority of the individual concerned, their access to clients and confidential information and the length of the restriction.
It’s common practice for post-termination restrictions to last between three and 12 months. A restriction in excess of 12 months is likely to be unenforceable – though 12 month restrictions have been upheld. The key point is that each case will be considered on its facts.
Networking sites
Connections on networking sites, such as LinkedIn, who are clients of your employer could, arguably, be their property. Messaging or posting to these connections after you have left the business could breach any client non-solicitation restrictions. Even updating your profile on such a site could amount to soliciting a client.
In some contracts of employment, employers specifically require employees to delete existing or prospective clients from their profiles on networking sites when their employment ends. Employees may also be prevented from reconnecting with these connections for the period of the restriction.
Tips
Always check for restrictions in any employment contract before you sign it. That is the time to raise issues and ensure that the restrictions are not going to jeopardise your career. When appropriate, try and negotiate. For example, a restrictive covenant could prevent you from later soliciting a business that you introduced to your employer. You could agree that the business should be excluded from effectively becoming a client of your employer over time, and you would be free to take them with you when you leave.
Poaching employees could cause problems too. Supposing, you’re a senior trader and are able to bring an ex-colleague with you to the new employer. If things do not work out as planned, when you depart, you could be prevented from going to another company with them. You could, for instance, try and ensure that any non-poaching employee restriction does not apply to that ex-colleague.
So remember, when you’re reviewing your contract, don’t pass over the restrictive covenant clauses. Failing to read them could come back to haunt you.