Companies hiring new employees may protect their revenue and client lists by requiring new hires to sign an agreement containing a non-compete clause. After an employee leaves the firm, a company may seek damages if its former employee starts his or her own business and solicits the firm’s clients.
Employment contracts may contain reasonable terms designed to maintain a company’s exclusive rights to generate revenue in a particular location or profession. This includes language protecting its client-contact lists, confidential data, material information and intellectual properties. When a new employee reviews a company’s contract, initialing its terms and signing it generally means that he or she agrees to abide by it.
Breaching an employment agreement
A resident of the Lone Star State found himself facing a legal action initiated by his former employer demanding that he cease contacting the firm’s clients. After 14 years of employment with a stock brokerage company, the former employee started his own registered investment adviser business and began offering financial advice.
As reported by Financial Planning Magazine, the company alleged that the former employee had breached a contract by calling at least one of its clients in an attempt to solicit his own business. The company’s employee contracts contain a non-compete agreement specifying that customer data belongs exclusively to the company. A new employee who signs on with the company agrees not to use its private information to contact or communicate with clients other than for in-house business purposes.
According to the complaint, a client informed the company that the former employee called him to tell him about his new business. Interpreting this communication as a solicitation, the company prompted its legal team to begin exercising its right to seek damages and an injunction from its former employee.
Seeking an injunction and damages in Texas
A company requesting that the court intervene and force a former employee to cease doing business with its clients is permissible in Texas. If a client solicited by a former employee begins receiving the same or similar services as the company provides, it may also sue for monetary damages.