Small business BIG growth®
Words by Mira Stammers, CEO of Legally Yours
Our employment lawyers are often asked whether or not it’s possible to take clients with you when starting up a new business or moving roles. We understand the appeal. It’s natural to want to leverage and build on your existing relationships. It’s even quite normal for your clients to want to move with you. However, before you move your clients to your new venture, consider the points outlines below.
Are they actually ‘your’ clients?
Though you may have developed and built the relationships, your clients may not actually be considered to be yours. One of the first clauses our lawyers will want to review in these circumstances is what’s called a ‘Restraint of Trade’ clause. This clause is common in employment agreements, and serves to prohibit the employee from taking existing customers or operating in competition with the former employer.
The good news is that Restraint of Trade clauses can, if not drafted well, we unenforceable. Given this, the first step before contacting your clients is to have a lawyer review your employment contract and advise you as to your ability to not only take clients but also work in competition with your former employer.
Is the client list confidential?
Employment agreements also often contain a confidentiality clause requiring the employee to keep certain information (generally including client information) confidential (i.e., not disclosed to others and not used for any other purpose other than in relation to their current role). This clause can be particularly restrictive as it generally will apply both during employment and after the employment relationship has ended.
Even if your employment agreement does not mention a confidentiality obligation, you may still owe a duty of confidence to your former employee under common law. This will depend on your personal situation and how your former employer has treated the client list. Again, an employment lawyer is the best person to review your employment agreement to determine whether this applies to you. Whilst many people ‘risk it’ when it comes to client lists, it’s important to know that if you are liable for a breach of confidence, you may be ordered to pay damages to your former employer.
Can I take client information with me?
Even if a client says they’ll follow you to your next venture, it is important to remember that you must not take any client files or client specific information with you when you depart. These items are the property of your former employer.
What should I do if I’m still unsure?
If you’re unsure please feel free to contact one of our employment lawyers on 1300 822 708 or email us for an obligation free phone consultation. Our expert employment lawyers can run you through the basics and give you the information you need.
Mira Stammers is the founder and CEO of Legally Yours, which provides specialist legal advice to consumers and small-business owners at fixed-fee prices. Mira is a regarded as a leading Australian lawyer and regularly writes legal articles for various small-business and property-investment publications.