...new business

Jurisdiction: 

Area of Law: 

Question: 

I am employed by a pest control company in central Calif. I want to start my own pest control business, what kind of trouble would I get in if I solicited the customers my employer has provided me with after I quit?

Selected Answer: 

DakotaLegal's picture

There's going to be some good

There's going to be some good news, and some bad news for you, when it comes to starting your own, new business after being an employee. The ability to start a new business is something that is pretty much available to any American, who follows the existing rules and regulations. In general, "following the rules" means you can usually work for one company on a Tuesday, and Wednesday go out and compete. There are going to be special limits, though, on where you an even open a competing business, and customer “lists” or contacts can be one of those problems areas.. So this is where we’ll start. The last thing to look at is whether you can take any of your old company’s customers with you. The answer is “maybe.”

If you signed a non-compete agreement, these agreements are enforceable as to a reasonable period of time, and in a reasonable geographic area. I’ve had some success with SCORE; be sure, though, that if you use them to review any local practices that you ask for someone with experience related to what you need, or else you may end up getting no help. In the same way, try and get really local help: here’s a link to the greater LA area, but you can use them to get to whatever you will have your business. http://www.scorela.org/

But always, there’s the idea of any promises you made: did you sign any agreements or contacts? Did you receive any oral orders, or make any specific promises? This can include the idea that you promised to be with the company for a specific period of time. Did you have any agreements about a specific area you would cover? If you made any promises, follow those promises. I’d even suggest you write down exactly what promises were made by you and to you. If there were no promises: write that down too. If you know the dates of any promises, make a sort of diary, indicating to the best of your memory what was said, and when it was said. This will be excellent ammunition if you are ever put in a position to recall what was said and why you acted as you did. Here’s a case, where a major pest control company did manage to enforce the terms of an agreement with a former employee… http://caselaw.findlaw.com/ms-court-of-appeals/1311502.html

The very best thing you will have going for you is what’s called “clean hands.” This means following all agreements scrupulously. There’s a big difference, courts have recognized, between using expensive information that could only have come from prior employer energies, and contacts that are fair game to anyone (such as in a phone book). How easy was it to get the customer contacts? Or out another way, how valuable are these collected contacts, in terms of the costs of collecting them? The more valuable they are, the more likely it’s unfair to simply take them (at least as a start-up).

Having clean hands will also have a lot to do with how much leeway a state court will be willing to give to the idea of your ex-employer’s supposedly proprietary client information. You posted the question in Colorado, about a California company: whether one, or both states are involved, can make an enormous difference. California routinely cancels non-compete agreements, so this can help you argue that your ex-employer can’t retrain your trade unreasonably. http://www.eskridgelaw.net/trade-secrets-non-compete-agreements/

Besides looking at your initial employment agreement or contract and promises, you can also look at any employee handbook you might have been given. If you worked at a distance (say the company was in California, but you worked in Colorado), you can try to look online to see what the company has posted on their web for employees.

There's also a “reality check” to the process of getting your ex-employer’s customers, too. How, for example, would the ex-employer hear about your taking customers? Some ex-employers actually troll, to see if you are contacting former customers. Some businesses simply cannot afford to try and stop ex-employees from leaving. But if you are leaving a big company, who has well-defined trade practices, with the tools and resources (lawyers) to try and enforce trade limits, then you may face a dedicated foe. These Goliaths may be willing to “roll the dice” to enforce what they think of as their property, and to warn other employees...even if the odds are they will lose any law suit against you.

All Comments

DakotaLegal's picture

There's going to be some good

There's going to be some good news, and some bad news for you, when it comes to starting your own, new business after being an employee. The ability to start a new business is something that is pretty much available to any American, who follows the existing rules and regulations. In general, "following the rules" means you can usually work for one company on a Tuesday, and Wednesday go out and compete. There are going to be special limits, though, on where you an even open a competing business, and customer “lists” or contacts can be one of those problems areas.. So this is where we’ll start. The last thing to look at is whether you can take any of your old company’s customers with you. The answer is “maybe.”

If you signed a non-compete agreement, these agreements are enforceable as to a reasonable period of time, and in a reasonable geographic area. I’ve had some success with SCORE; be sure, though, that if you use them to review any local practices that you ask for someone with experience related to what you need, or else you may end up getting no help. In the same way, try and get really local help: here’s a link to the greater LA area, but you can use them to get to whatever you will have your business. http://www.scorela.org/

But always, there’s the idea of any promises you made: did you sign any agreements or contacts? Did you receive any oral orders, or make any specific promises? This can include the idea that you promised to be with the company for a specific period of time. Did you have any agreements about a specific area you would cover? If you made any promises, follow those promises. I’d even suggest you write down exactly what promises were made by you and to you. If there were no promises: write that down too. If you know the dates of any promises, make a sort of diary, indicating to the best of your memory what was said, and when it was said. This will be excellent ammunition if you are ever put in a position to recall what was said and why you acted as you did. Here’s a case, where a major pest control company did manage to enforce the terms of an agreement with a former employee… http://caselaw.findlaw.com/ms-court-of-appeals/1311502.html

The very best thing you will have going for you is what’s called “clean hands.” This means following all agreements scrupulously. There’s a big difference, courts have recognized, between using expensive information that could only have come from prior employer energies, and contacts that are fair game to anyone (such as in a phone book). How easy was it to get the customer contacts? Or out another way, how valuable are these collected contacts, in terms of the costs of collecting them? The more valuable they are, the more likely it’s unfair to simply take them (at least as a start-up).

Having clean hands will also have a lot to do with how much leeway a state court will be willing to give to the idea of your ex-employer’s supposedly proprietary client information. You posted the question in Colorado, about a California company: whether one, or both states are involved, can make an enormous difference. California routinely cancels non-compete agreements, so this can help you argue that your ex-employer can’t retrain your trade unreasonably. http://www.eskridgelaw.net/trade-secrets-non-compete-agreements/

Besides looking at your initial employment agreement or contract and promises, you can also look at any employee handbook you might have been given. If you worked at a distance (say the company was in California, but you worked in Colorado), you can try to look online to see what the company has posted on their web for employees.

There's also a “reality check” to the process of getting your ex-employer’s customers, too. How, for example, would the ex-employer hear about your taking customers? Some ex-employers actually troll, to see if you are contacting former customers. Some businesses simply cannot afford to try and stop ex-employees from leaving. But if you are leaving a big company, who has well-defined trade practices, with the tools and resources (lawyers) to try and enforce trade limits, then you may face a dedicated foe. These Goliaths may be willing to “roll the dice” to enforce what they think of as their property, and to warn other employees...even if the odds are they will lose any law suit against you.