In California, Can I Communicate with Client Even Though I have a Non Compete?
This question is asked all the time. The short answer is, yes you can communicate or “announce” your new employment. However, if you are bound by an enforceable non-solicitation agreement, you may not solicit the client. But, you can call them, talk to them, talk about the weather, sports, etc. You just cannot “solicit” them. Below is some of the California law on this issue.
Ok to “Announce” New Employment:
Merely informing customers of one’s former employer of a change of employment, without more, is not solicitation. American Credit Indem. Co. v. Sacks (1989) 213 Cal.App.3d 622, 635. A former employee is permitted to announce a change of employment to individuals or firms he or she had serviced for the former employer, even if those individuals or firms were on a protected trade-secret customer list, because the right to announce a new affiliation is basic to an individual’s right to engage in fair competition. American Credit Indem. Co. v. Sacks (1989) 213 Cal.App.3d 622, 636.
Be careful though to not go beyond “announcement”. An “announcement” of new employment that informs the former employer’s customers of the interesting competitive alternatives available from the former employee’s new employer and invites inquiries goes beyond announcing new employment and is solicitation. American Credit Indem. Co. v. Sacks (1989) 213 Cal.App.3d 622, 636-637. Also, see below regarding customer lists that are truly protected trade secrets.
Competition Allowed if No Non-Compete But Cannot Use Trade Secrets
If no confidential information (trade secrets) is used, a former employee is free to compete with his or her former employer, to advise the former employer’s customers of his or her new activities, and to solicit their business. Rigging Int’l Maint. Co. v. Gwin (1982) 128 Cal.App.3d 594, 612; Whitted v. Williams (1964) 226 Cal.App.2d 52, 59 [the receipt or acceptance of further business by the new employer from former customers of the former employer who were not solicited or are not retained through the use of the former employer’s trade secret may not be enjoined].
The secrecy prong of the test is satisfied if an employer requires employees to sign a confidentiality agreement respecting its client list, expiration dates of customer contracts, list of business leads, history of customer relationships, and related client information. American Credit Indem. Co. v. Sacks (1989) 213 Cal.App.3d 622, 631.
Confidentiality/Non-Disclosure Agreements (or “NDA”):
Many employers require their employees to execute a separate confidentiality / non-disclosure agreement. This prevents the employee from using this confidential information to solicit business during and after employment. Also, even in the absence of a confidentiality agreement or NDA, the secrecy prong is satisfied if the information is not divulged to anyone outside the business, is only divulged to employees when necessary for them to carry out their functions, and the employees are told the information is confidential. Courtesy Temp. Serv., Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1288.
Agreements Not to Use Trade Secrets are Generally Legal:
An agreement not to use trade secrets is not an unlawful restraint of trade unless it is more extensive than is reasonably required to protect the employer’s interests. By-Buk Co. v. Printed Cellophane Tape Co. (1958) 163 Cal.App.2d 157, 164. A promise in an employment contract not to use confidential information regarding customers for one year after termination of employment is enforceable. Gordon v. Landau (1958) 49 Cal.App.2d 690, 694.
If the customer list, however, is a trade secret, the former employee must stop at announcing his or her change of employment, and cannot solicit the customer of the former employer, because providing personal service to a customer whose identity is a trade secret does not thereafter render that customer fair game for solicitation. American Credit Indem. Co. v. Sacks (1989) 213 Cal.App.3d 622, 636.
For more information on non-compete agreements, click here
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