Author: Daniel A. Lublin
Having made the decision to jump to a competing investment firm, broker Ed Darling* thought he would take a few clients with him. But when Darling got slapped with a bill for nearly $20,000, he wished he had just stayed put.
Darling was a highly successful broker for the St. Albert, AB investment firm Edward Jones. After building up a client base, he felt he’d find greener pastures by starting up his own office with a competing firm. However, Darling wasn’t about to leave without taking his clients with him.
He printed a copy of the client list, as well as thousands of pages of contact information. He then took handwritten notes of important details concerning each client. Feeling guilty, he later returned the information. It was only done after making copies.
Edward Jones caught on shortly after. In the six months after Darling’s departure, a large portion of its client base in St. Albert transferred to Darling’s new firm. When Edward Jones learned of Darling’s delinquency, it sued him.
The court found him guilty of disregarding clear language in his employment contract. When Darling joined Edward Jones he signed a contract stating that in the event of his resignation, he was required to surrender all customer files, not use any of the information in a manner adverse to the company and refrain from contacting former clients for a six month period; restrictions that are hardly confining to most employees.
For Darling though, it cost him big time. He was ordered to pay Edward Jones nearly $20,000 for breaching the terms of his contract. Employers frequently try to limit your ability to take your clients with you on your way out the door. Darling had to learn the hard way. For those of you considering jumping to a new opportunity, here are four legal points to remember that will keep you both in business and out of the courtroom:
- Not all non-solicitation or non-competition clauses are enforceable against you. For a court to uphold these post employment restrictions, they have to be drafted clearly, pertain to a reasonable geographic location and last for a reasonable period of time after having left your job.
- In addition to contractual obligations, all employees have an unwritten duty of good faith and fidelity towards their employers. This duty prohibits you from taking confidential client information to use in competition against a former employer.
- After you leave, be sure to return all of your employer’s property.
- For those who had considerable control and responsibility in the company, you may be viewed as a fiduciary. Fiduciaries are under a very strict obligation to act only in the best interests of the company, even after leaving.<l/li>As Ed Darling found out, there is more to switching jobs than merely two weeks’ notice. By breaching your post employment obligations, you too could find yourself in the courtroom and your fast-paced career derailed.
[* Name has been changed for this publication.]