How to prevent client theft
Clients & parting staff
It is to be expected that our employees will come and go over time, but it is not okay when they take our clients with them when they leave.
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 - and it may not 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, what can we do to protect our business from the threat of client theft?
We suggest including non-competitive clauses in both employment contracts and client agreements.
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, this clause is more effective as a preventative measure rather than a punitive one, as it could be expensive and time-consuming to enforce. Of course, hiring the right people in the first place and working to improve employee retention could also prevent the issue.
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."
As this is a commercial clause between two companies, it is easier to legally enforce. While courts will typically favour the employee in employer-employee disputes, you're more likey to get a favourable outcome when going up against another business.
Will the client object to this clause being included? We believe it's unlikely. Do clients respect it? By and large yes, particularly when it is pointed out to them.
However, when we decide to include this clause in client agreements, we must inform our staff that:
As managers, we have a duty of care to look after the company and our remaining employees. Therefore, we are obligated to act on this matter and should state that we have every intention to do so.
While it is okay for staff to leave at some point, it should not be with the company’s clients in their back pocket!
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