Salespersons who have worked for competitors are obviously very attractive candidates when companies are looking to add new skills and experience to their sales group. Since they already are active in the relevant industry and markets it typically does not take long to bring them up to speed and they also should have a good familiarity with how business done and the products and services that are available from all of the companies approaching the specific customer base. However, salespersons who have worked for other companies may have obligations to their prior employers not to use trade secrets or confidential information learned or acquired at their prior employment, and may have personally signed contracts so promising. In addition, such persons may have explicitly agreed not to solicit former customers, even if trade secrets or confidential information of the prior employer are not being used. Accordingly, when hiring salespersons who have worked for competitors companies must be mindful of potential liability it is found that they or their employees knowingly used confidential information of their competitors or engaged in other activities that might be prohibited under contracts between the new employees and their former employers.
State laws regarding trade secrets and enforceability of non-solicitation agreements differ and the applicable law should be closely reviewed; however, the following general guidelines should be given to new salespersons before they begin contacting any customers or sharing information with colleagues at their new company:
They are allowed to use their general knowledge, skill and experience acquired in their former employment; however, they may not use the confidential information or trade secrets of the former employer in so competing (including information that is not in tangible form and is simply in the memory of the new salesperson).
Trade secrets or confidential information of a former employer should not be disclosed anyone at the new company and they certain should not bring any confidential or proprietary information of any kind from their former employer to the new company. For example, they should not transfer to the computer network of the new company, via e-mail, CD, thumb or flash drive, or other removable storage device, any confidential information or trade secrets from their former employer, including personal contacts.
They should not solicit former customers of their former employer; however, if former customers do contact them and ask to do business with you they may send them information about the new company, open an account, and sell to them. It is important to carefully document how former customers first made contact.
If former co-workers of the new salesperson contact them and ask about employment opportunities at the new company they should be given the phone number of the human resources department of the new company and the new salesperson should refrain from any further conversations with former co-workers regarding prospective employment.
It is important to emphasize how important these rules are by making sure that new salespersons understand that the use of confidential information from competitors of the company is grounds for discipline up to and including termination of employment. All of these points should be covered in the initial entrance interview with new salespersons. Given the sensitivity of the issues and high likelihood of possible litigation with competitors it is recommended that legal counsel join the initial entrance interview to be sure that the new salesperson understands his or her obligations. In addition, the guidelines described above should be given to the new salesperson in writing and he or she should be asked to acknowledge receipt of the guidelines and the fact that they have been reviewed and discussed with the company before the salesperson began engaging in sales activities.
The content in this post has been adapted from material that appeared in Business Counsel Update (April 2007) and is presented with permission of Thomson/West. Copyright 2008 Thomson/West. For more information or to order call 1-800-762-5272.