How to prevent client theft

Clients & parting staff

Staff do leave, that is to be expected as few stay forever. However, it is not okay that they take your clients with them as a parting gift.

Clients belong to the employer. The job of employees is to directly or indirectly foster relationships with these clients, look after and make them happy.

The parting employee was paid for this during their employment.

It bears repeating, these clients belong to the employer, not the employee.

Non-competitive clauses are typical in staff contracts.  They are effective but only to some extent, usually it is expensive and time-consuming to enforce them.

There is an alternative way of locking the door and that is to insert a clause into client agreements.

Clients and parting staff

Client agreement clause

"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."

This is a commercial clause between two companies, not an employer/employee agreement in which the courts typically favour the employee.  The employee can’t interfere with this agreement.

Will the client object to this clause?  I believe this to be unlikely, as in the 25+ years I have used it, I have not had a client complain.  Do clients respect it?  By and large yes, particularly when it is pointed out to them.

However, staff must be informed that:

  • This clause exists in client agreements
  • Clients are bound by this agreement
  • You have every intention of enforcing this clause

Inform employees that if a staff member breaks their agreement and takes clients away from the company, then the company will suffer.  Therefore, their current colleagues are all endangered.

As managers, we have a duty of care to look after the company and the remaining employees.  It is our obligation to act on this matter and there is every intention to do so.

It is okay for staff to leave at some point (we don’t expect most of our employees to retire from the company) but if and when they leave, it should not be with the company’s clients in their back pocket!

Put it into your client agreements - prevention is better than cure.

Of course, hiring the right people in the first place could also avoid this issue.

Christian Madsen - Managing Director at 11 Recruitment
Christian Madsen
Managing Director
11 Recruitment

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