Protecting Your Most Valuable Business Asset
By: Scott
Richardson
As a business owner, what is your most valuable asset? You might
say it is your equipment, or maybe that it is
your building. But when you think about it, your
most important asset is your customer base. Without customers you
don't need equipment or buildings. So how do you protect this most
valuable asset and minimize the risk of a departed sales
person taking your customer list and pilfering your customer base?
The answer is to have well crafted employment covenants that
minimize this risk.
The law disfavors agreements that keep departed employees out of
their chosen profession for a significant period of time. However,
the law will allow for non-solicitation/non-service agreements that
prohibit a departed employee from soliciting or servicing your
customers after they leave.
In addition, you can protect your customer lists and other
unique business information with "anti-piracy" agreements requiring
return of such data and prohibiting its use. You can also prohibit
the pirating of your employees by the departed person as well. The
law even allows you to carve out certain competitors and prohibit
your former employee from working for them for a period of time,
within reason.
The reach of these covenants is limited however. You must have a
protectable business interest in the customers you seek to protect.
The length and breadth of the restrictions must be reasonable, or
the agreement itself may become unenforceable. This all requires
careful analysis of your business and your customers.
However doing nothing - having no covenants - is an invitation
to your departed employees to take customers. Just like any other
risk, this is one where an ounce of prevention (employment
covenants) is worth a pound of cure.
Sometimes this issue confronts you in another way as a business
owner when you hire someone who executed an employment covenant for
their prior employer. It is important that you know about
these agreements and review the terms. Soliciting the prior
company's clientele through your new employee may subject you to an
interference claim. Protracted and expensive litigation is not
something you want, and it is important to understand prior
agreements your new employee has made.
Get your folks to sign well crafted covenants and protect your
business. Also, be fully aware of any prior covenants your
employees have signed. This important risk management can help you
avoid the pain of spending your dollars and days in court.
About the author: Scott
J. Richardson is a shareholder in the Phoenix law firm of Jaburg Wilk. He assists clients
with insurance coverage, administrative boards and agencies and
risk prevention. Scott can be reached at 602.248.1012 or sjr@jaburgwilk.com
This article is not intended to provide legal advice and only
relates to Arizona law. It does not consider the scope of laws in
states other than Arizona. Always consult an attorney for legal
advice for your particular situation.
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