Data protection - client lists

[MG]

Just to check, what policies do you have in place to protect your client database? How do you stop employees running off with your clients?


Finally, have you ever actually heard of anyone being SUED because they left their employer and nicked their clients in the process?

[Azazel]

Sorry, missed this one.

Three things:

1) Robust contracts
2) Robust contracts
3) Robust contracts

You need something water tight (i.e. checked by good lawyers) that state that people can't work with your clients on leaving the company for a certain amount of time.

I've seen some contracts that actually state you can't undertake similar work for a competitor for a year or two upon leaving the company, i.e. you can't work as a recruitment agent. I can't see how this is legal as it would presumably be a restraint of trade, violation of some human right to earn a living etc. etc.

I've never taken anyone to court, I'm pleased to say that most of my leavers leave on good terms, some set up their own business and to a degree I'm even happy to offer them a little advice along the way.

But I expect that if you were you would have to prove how your business has been affected. For example, if you have a contract that says you will work exclusively with a client to deal with all their hiring until September, and an employee sets up their own company and signs them to a contract from September I can't see how you could sue them, even if you have something in their contract that says they can't work with your clients.

Just a guess though, I am not a lawyer.

[MG]

But do you know of anyone that has even gone to court over this sort of thing, and what the outcome was?

[Bully's Special Prize]

Personally no, but that doesn't mean that it hasn't happened.

I've done some searching as a Monday morning activity (I'm ignoring all my emails), firstly recruitment consultant magazine don't give much help here, the only thing they say is:

Living in a more regulated and litiginous society has additional perils for any start-up. Recruitment businesses are more and more willing to enforce restrictive covenants in consultants’ contracts when moving to set up on their own – this could prevent you from speaking to your most favoured client for over six months. Add to this a need to plan and fund your business beyond the first 6-12 months, and the process looks more daunting.

So it doesn't give a figure.

A little bit more info on them in general is here. I think this part is interesting:

A restrictive covenant is usually a clause in a contract which prohibits an employee from competing with his ex-employer after the employee has parted company with the business, or prevents the ex-employee from soliciting customers of the business by using knowledge of those customers gained during his prior employment.

However, if the ex-employer can convince a court that the covenant is:

• designed to protect his legitimate business interests; and
• that it extends no further than is reasonably necessary to protect those interests

then it will be upheld and enforced.

So any that simply say "you cannot set up a competing business for 12 months" would be unenforceable, you would only be able to stop them poaching your clients. I can't see how many companies would invest their resources into pursuing an extremely costly legal fight if an employee did run off with a couple of clients, especially if there wasn't a "locked in" contract that you would do ALL their hiring without exception (very rare). The client would simply state that they were exploring alternative recruitment options.

Finally, I think this link is a good source of interesting information on restrictive covenants in general:

Restrictive Covenant for Recruitment Consultants - Employment Law for Recruitment

Right, time to tackle those emails.

[MG]

Good research there Bully, well done. When I put "recruitment consultant contracts" into google I just got loads of contract law job positions that were available!