Restrictive Covenants – Part 3 of 3:

Your Former Employee is Stealing Your Clients – What can you do?

One of your employees quits to work for another company. Shortly thereafter, your clients start requesting to transfer their files to your former employee’s new company. You then look at your former employee’s computer and see that the employee has copied your client list. What can you do?

First of all, review your employment contract – have you contemplated this situation and set out ground rules? Did you draft the contract with the assistance of legal counsel? If not, you may wish to get legal advice as to whether the contract is enforceable. Many contractual terms that restrict the ability of employees to contract freely are interpreted narrowly by Ontario courts.

Your contract should also account for any professional responsibilities that both you and your employees have. Ontario courts are more likely to uphold a contract that references your respective obligations to your regulators.

Assuming that you have a validly drafted contract that prohibits the solicitation of clients, the next question is what to do about it.

You will want to determine how your employee’s activities are affecting your business. How much revenue have you lost so far and how much could you lose? Is it worth pursuing legal action against this employee? For example, if the original owner of your professional business that you bought is soliciting your clients, this solicitation could gut the value of your business. You may have no choice by to pursue legal action against the employee. By contrast, if your employee has taken a couple small files with them, legal action might not be worth pursuing.

If you do decide to pursue legal action, seek help quickly. To be successful in an injunction to stop the employee from soliciting your clients, you need to show the courts that without immediate action, your business will be irreparably harmed.