How to prevent client theft

Written by Christian Madsen

Managing Director of 11 Recruitment

Clients & parting staff

It is to be expected that our employees will come and go over time, however, it is not okay when they take our clients with them when they leave. If you are a business owner or manager, it is crucial to take preventative measures to protect your clients and safeguard your business. In this article, we will discuss how to prevent client theft and provide practical tips on how to mitigate the risk of losing clients due to employee departures.

While our employees may be responsible for building and maintaining client relationships, they do so on behalf of the business and must sever those relationships at the end of their employment. At the end of the day, those clients belong to the business, not the employee.

However, this may not stop departing employees from asking clients to come with them or prevent clients from following departing employees on their own accord.

As stated in an article by Lexology, "Well-connected employees are often the most important assets for an ambitious business. However, they also present a challenge if they leave. They can be valuable commodities in the wider market and therefore more susceptible to approaches from competitors. Alternatively, they might have plans to set up on their own. When good people walk out of the door, clients are frequently tempted to follow."

So, how to prevent client theft?

We suggest including non-competitive clauses in both employment contracts and client agreements.

How to prevent client theft Clients & parting staff

The non-competitive clause

Non-competitive clauses are commonly found in employment contracts. As stated by Lexology, "The most important port of call is the employment contract. If this does not contain any post-termination restrictive covenants, the employer’s protection is very limited".

However, enforcing such clauses can be costly and time-consuming, making them more effective as a preventive measure. Hiring the right employees and focusing on improving employee retention can also help to prevent client theft.

An alternative way of protecting your client base from theft is to include this clause in client agreements. "The client is not permitted to trade with past employees for a period of 24 months from termination of the employee's employment with the company."

Since this is a commercial clause between two companies, it is easier to enforce legally, and courts are more likely to favour the employer in employer-client disputes.

Clients are unlikely to object to this clause, and it is generally respected when brought to their attention.

However, when we decide to include this clause in client agreements, we must inform our staff that:

This clause exists.
Our clients are bound by this agreement.
We have every intention of enforcing this clause.
If they or any other employees decide to break this agreement then the company will suffer, and their ex-colleagues will also suffer as a result.

As responsible managers, it's our duty to safeguard the company and our remaining employees. Therefore, we should act accordingly and state our intentions to enforce this matter.

While it is okay for staff to leave at some point, it should not be with the company’s clients in their back pocket!

How to prevent client theft The non-competitive clause

Want to recruit top talent?

Now that you understand how to prevent client theft, you may be interested in learning more about 11 Recruitment's permanent recruitment services.

11 Recruitment is the leading perm and temp recruitment agency for white-collar staff. We source high achievers for jobs in Perth and throughout Australia.

At 11, we typically get involved in the recruitment process when a client is either seeking a high achiever to elevate their business, recruiting for a role that is hard to fill, or having difficulty sourcing or attracting suitable candidates.

We provide the following recruitment services.