Legal Question in Business Law in California

It is a good idea to have a confidentiality/non-solicitation/non-circumvention agreement with employees and vendors, or to have language covering those items in the employment agreement.

This question is an often asked and often litigated one, and, not surprisingly, the answer is yes and no.

Employers in California can't prevent an employee, or former employee, from seeking or gaining lawful employment. To the extent that your former employee goes to work for a competitor, he or she is free to contact her or her former customers and seek their business. However, there are limitations - the former employee can't use any of your proprietary information to compete with you. Thus, if you have a customer database that contains proprietary information (such as their purchasing history with you), the ex-employee can't use that information to compete, and you can sue to stop him if he does.

Thus, the question is, what's on the "customer list" referenced in your question? If it contains proprietary information, you can probably stop its use. But, act quickly, or you may give up those rights.

Generally customer lists and information is considered to be a trade secret belonging to the employer. The salesperson generally does not have the right to use that customer list after leaving the employment.

Further, the former employee (salesman) IS typically allowed to contact customers with whom s/he dealt but only to inform them of his/her new contact inofrmation.

The former employee generally is NOT permitted to solicit by specifically targeting the same people with whom s/he had been contacting for the former employer.

The good will that the saleperson developed while an employee belongs to the employer, NOT the salesperson. So, the customers do not "belong" to the salesperson. They "belong" to the employer.

This is an area that results in frequent litigation between companies and their former employees. The former employee is frequently accused and frequently guilty of misappropriation of trade secrets and "unfair competition".

Note: The former employer should treat its trade secrets like a secret and prevent the divulging of things like customer lists to third parties and other employees who have no need to access the secrets.

Additionally, confidentiality/non-disclosure agreements should be signed by all employees so they understand their obligations and the company shows that it is keeping its trade secrets, secret.

J. Caleb Donner

LEGAL WARRRIORS�

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The problem with trying to do this with an agreement is that the things you're trying to prevent from happening are either already illegal or things the employee has an absolute right to do, regardless of contract.....not to mention that in this case, it's too late.

To be specific, (a) it is illegal to misappropriate your employer's (or former employer's) trade secrets, and (b) it is ilegal for an employer to restrain an employee's future right to engage in any legal business, trade or occupation. One way to summarize this is, you can leave your job to go into competition with your employer, but you can't take the sales manager's Rolodex on your way out.

Whether the customer list developed by the salesman belongs to him, or is the employer's trade secret, is a question of fact. In a fair number of cases, but certainly not all, the list will turn out not to be protected by trade-secret law, and thus the employer will have no valid suit against the salesman for misappropriation of trade secrets (or anything else). However, sales people assume a substantial risk when they transfer knowledge of the marketplace obtained while working for ABC to their new position at XYZ, since some of what they know may rise to the level of a protected trade secret. Don't take the doggone Rolodex!