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What To Do When A Former Employee Poaches Your Customers

Employee signing contract of employment

Poaching clients in UK law is difficult. This can cause significant stress within the business. Whether you’re a small business owner or a large corporation, when a former worker leaves your employ, it’s a stressful time. Not only do you have to contend with finding an appropriate replacement, you then have to train the new member of staff to the level of their predecessor and manage that transition with grace and patience. Then there’s another reason to be fearful: poaching. If an ex-employee is approaching clients and trying to steal work from you, that’s a serious problem. Below we’ll cover how to prevent an ex-employee from doing just that, what to do when a former employee approaches your customer and review how you are covered in UK law. 

 

 

What is a Restrictive Covenant

A restrictive covenant is a document or clause within a contract that attempts to restrict the activity of an employee to prevent them taking action that could damage the business that they worked for. Such covenants are only enforceable to prevent this damage. If they are seen by the courts as too broad and are in effect asking too much, they will likely not be enforceable and you will not be able to use these to prevent the poaching of your clients.

 

Your Rights As An Employer 

Let’s cover the bad news first. Are you in a position where you don’t have a restrictive covenant in place? If your ex employee did not have a restrictive covenant in their contract which was signed, there is probably not a lot you can do legally to stop them.

Without making it clear in their contract of employment that they should not contact your clients for a number of months after leaving the company, you don’t have a legal right if your ex-employee poaches your clients. 

We’ll talk more about how to write up an effective clause in your contract of employment moving forwards but it’s important to remember that you can expect most ex-employees to respect your mutual trust and confidences shared whilst working for your business. Most ex-employees won’t try to steal your clients. This fact doesn’t help you when they do however. If it is a risk to you moving forward, then you should consider it if it potentially puts your business at risk. 

 

Their Rights As An Employee 

With that said, certain employees will try their luck as they leave. It’s morally wrong and as a business owner it can feel like a breach of the trust and respect you showed them by involving them in your business to start with, but that doesn’t mean they can’t poach clients if they want to. 

Sometimes that’s just business. Unless you have a restrictive covenant in your contract of employment that specifically stops them from contacting your clients. If they’re in breach of that contract, then they could be seen as stealing from work, and those have consequences. 

Notice how we said ‘could be seen’. That’s because in 2023 it’s difficult to prove they ever really stole your clients, even with a restrictive covenant in their contracts. Nowadays we’re all connecting on social media and professional networking sites like LinkedIn. If a connection is established here and your client chooses to work with your ex-employee instead of you, then there’s not much you can do. 

Still, it’s worth attempting to prevent it to protect your business assets and client relationships.

 

The Best Way To Prevent Ex-Employees Stealing Clients 

Without a doubt the single best way to prevent ex-employees from stealing your clients is by including a restrictive covenant in their contract of employment when you first hire them. This information may be coming too late for some of you, but it’s a good idea to get restrictive covenants in place for the future (we’ll cover what to do if you don’t already have restrictive  covenants in place later in the article).

 

A Restrictive Covenant? 

As discussed, a restrictive covenant is a clause in a contract that restricts the activities of an employee when they leave your business. Essentially, it tells them what they can’t do when they leave, and it’s usually included in the contract of employment which they must sign before they even begin working with you. That way, they know what to expect upfront.

There are many different types of restrictive covenants an employer can use, but in this case, the most relevant will be a non-solicitation order. Here an ex-employee is restricted from poaching existing and prospective customers from you because they’re unable to contact them legally and attempt to take them to their new company when they leave. 

A non-dealing clause can also be useful here, which states that the former employee is unable to deal with customers after leaving your business. 

Whichever restrictive covenant you use (we recommend both non-solicitation and non-dealing), you’ll also have to specify a time period. 

 

How Long Should A Restrictive Covenant Last? 

The key thing to remember about restrictive covenants is that they’ll only be enforced in a court of law if they’re reasonable to begin with. Even if your ex-employee signs a contract stating they’ll never so much as look in your customers’ direction for as long as you both shall live, no judge in the UK would ever enforce it if they poached a client of yours 5 years after leaving your business. 

So, what is considered reasonable?

For senior members of staff a non-solicitation and non-dealing order of around 6 months is usually considered reasonable. This will prevent them from contacting or dealing with your customers for 6 months after leaving your business. After that time period, they’ll legally be able to talk with your clients again should they wish. 

Anything longer than 6 months could mean your case is thrown out of court as being an unreasonable restrictive covenant, so it’s best to keep your timeframes long enough to secure your customers, but not so long as to be considered unreasonable. 

 

Can I Use Geographical Locations Too?

Yes, you can also restrict your ex-employee from dealing with customers in your immediate vicinity for a period of time if you think your location is key. This might be especially useful for business owners who have lots of local clients and a service that’s relatively unique in the area. 

Again, you have to be reasonable with the restrictions, though. Keep the radius short and only restrict your ex-employees from operating in the area for a short amount of time (no more than 6 months), if you ever hope to enforce your contract in a court of law in the UK. 

 

What To Do When A Former Employee Approaches Your Customer 

There are certain things you’ll need to do as a business owner to make sure any restrictive covenants or non-solicitation orders you’ve put in place are enforceable, and then you’ll need to enforce them when a former employee approaches your customer in direct violation of their contract of employment. 

So, here’s what to do:

1. Include A Restrictive Covenant In Your Contract Of Employments 

The first thing to do is clearly set out your restrictive covenants in their contract of employment before they start. Include:

  • Type of restrictive covenant – non-solicitation, non-dealing, etc
  • The time period it relates to – e.g. for 6 months after leaving the business
  • Geographical restrictions – no business within 1 mile, for example
  • A reminder that signing the contract means they accept these terms and if they breach them upon leaving your business you will enforce it in court

 

2. Get A Signed Copy Of Those Contract Of Employments 

It’s vital that you get a signed copy of this contract. That way, if the worst comes to worst and your ex-employee breaches the contract, you have proof that they read and acknowledged the terms to begin with. It proves they knowingly went against the contract they agreed to, and that gives you something to action in court. 

So keep copies of the contracts your employees sign, and be ready to use it as evidence in court if needs be. 

 

3. Remind Your Employee When They Hand In Their Notice 

When the time comes for your employee to part ways with the business, be sure to remind them of the restrictive covenants they agreed to when first joining your business in writing. Remind them that the restrictive covenant will be in action once they leave, remind them of the restrictions they face and how long for, and let them know that your business intends to enforce those covenants if they breach them. 

 

4. Enforce Those Covenants In A Court Of Law

After your ex-employee leaves, if you receive information suggesting they’re in breach of contract, you can enforce the covenants in court. Yes, it will be time consuming, and yes, it will cost your business money, but for some businesses it’s worth the extra time and money because it protects your business assets and client relationships long term. 

 

Stealing From Work Consequences UK 

What are the consequences of stealing from work in the UK if an ex-employee is found to have been in breach of their restrictive covenants? 

Well, the first thing you, as the employer, can do is apply for an interim injunction. This essentially stops your ex-employee from being able to continue with their activities until a full hearing can take place in court to establish whether or not a restricted covenant has been breached. 

Sometimes, this interim injunction is enough to stop your ex-employee in their tracks as it shows you’re willing to take the matter seriously. 

If this doesn’t stop them, then a full hearing will take place in court, where a judge will assess the reasonableness of the restrictions, and whether or not your ex-employee has breached them. If it’s determined that they have, then they will be unable to continue contact with your clients, and they’ll likely have to pay you compensation as punishment. 

 

What If You Don’t Have/Want A Restrictive Covenant?

Not every employer sees a restrictive covenant as strictly necessary. After all, taking an ex-employee to court over breaching a non-solicitation order is probably more hassle than it’s worth financially. In some cases it can cost £1000s in lawyer fees and court costs, and whilst yes, it will set an example for all future employees and you’ll likely be awarded some compensation, you might not think it’s worth it. 

So, if you’re like hundreds of other business owners who haven’t included a restrictive covenant in their employees’ contracts, what can you do instead to either prevent ex-employees from approaching clients to begin with, or hold on to the clients you have?

 

Customer Loyalty Scheme 

The moment you hear a senior member of staff is leaving and is likely going to try and take clients with them, switch your focus away from them and towards your clients instead. 

There’s a reason your clients work with you – your business does a good job and they’re impressed by your work. Set up a customer loyalty scheme where they’ll benefit from staying with you. You could use:

  • Discounted rates
  • Reward schemes 
  • Free services

and much more besides to entice your clients and keep them on your side. 

 

Marketing For New Clients 

Rather than spending £1000s in lawyer and court costs to enforce a restrictive covenant, why not use that money for a marketing campaign to try and bring in new clients? New clients will bolster your business, and your ex-employee won’t be able to poach them. 

 

Choose The Right Staff 

When your ex-employee shows their true colours, focus on finding their replacement, and make sure they’re an upgrade on the last. Find someone who believes in the power of mutual trust and respect, and make them a key part of your business so everybody wins. 

And use a restrictive covenant in their contract of employment as an insurance policy, too…

 

Choose The Right Clients

If your ex-employee poaches a client of yours, let them. Do you really want to work with a client who thinks the grass is greener elsewhere? For many business owners it’s simply best to move on and focus on new clients with the right attitude who appreciate your business and all the work you do for them.

 

What To Do When A Former Employee Approaches Your Customer: Conclusion

Restrictive covenants are a strong way to discourage your ex-employees from poaching your clients and stealing work from under you. But enforcing them will cost money and time on your part. It may be worth it, though, to prevent loss of earnings in the future should your ex-employee attempt to approach even more of your clients. 

You might also consider letting your ex-employee and client leave without consequence, and instead turning your attention to growing your business without them.

Whichever approach you take, there’s no denying that an ex-employee approaching clients is disrespectful and upsetting for many business owners. But if you respond appropriately, you can make sure your business isn’t hurt by their actions too.

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