This is one of the most hotly-contested areas of intellectual property disputes in our California employment law practice and comes up regularly in our Santa Clara )(Silicon Valley) and San Diego and Orange County cases. we’ve’ seen employers demand that our clients, their former employees cease “doing business” with customers that were called upon (and in some cases brought in) by our clients. Here are some rules to consider:
1. A broad prohibition on “all customers” will not fly; it must be limited to not soliciting or using a legally protected customer or vendor list.
2. If names are readily available in the public domain, no injunction would be allowed against their use.
3. If the customer initiates contact with the former employee, that’s not subject to prohibition.
Your former employer must satisfy the following tests in order to receive an injunction against you to contact their customers: Irreparable harm; balance of hardship; public interest. Be wary of whether you are giving away propriety information (and what that is could be the subject of another blog).
4. What is the property scope of an injunction? “Narrowly tailored” is the key concept, to remedy only specific wrongs shown by your employer, rather than stopping all breaches that might conceivably occur. As such, a typical injunction might require disallowing the collating of trade secret data; reuse, resale, or distribution of customer lists; require destruction of all writings which contain customer-identifiable information.
Courts are reluctant to stop former employees from doing business with customers of their former employer. It is “fair competition” announce a new “home”. Just don’t “solicit” these former customers. As stated in a leading case (Retirement Group vs. Galantic, 176 CA4th 1226, 1237 (09), the crux of the problem is the misuse of a trade secret customer list, rather than the act of soliciting. As stated in an excellent article in the Daily Journal (11/21), the restriction ;;should be on use of the list, not going out and finding customers.
In sum, participating in general marketing within the industry (such as going to trade shows, speaking at such events, etc.) is not prohibited. As stated in Pyro Spectaculars “the court will not impose the over-broad restriction…enjoin defendant from doing business with any customer of plaintiff…”In this case, the customer had solicited the contact with the former employee and this was not subject to an injunction.
Our practice at Santa Clara County Employment Attorney and Orange County Employment Attorney has seen many variations on this theme. California Business and Professions Code prohibits covenants not to compete. In several cases, the California courts have refused to enforce judgments of sister states enforcing covenants not to compete. These cases are based on the rationale that such restrictions violate the fundamental public policy of this state. Seek legal advise from an attorney licensed in your state (we practice throughout California) and knowledgeable about this complex area of law.
Give us a call if you are a former employee being prohibited from contacting former customers. 877 789 9707. Never a charge to talk it over; don’t give up your right to earn a living!