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Protecting Your Customer List

Your Customer List is a Valuable Asset of Your Business

Every business in today's service-intensive economy possesses a loyal clientele that it considers both integral and invaluable to its economic growth. Often, this clientele takes years to build and entails a major investment of time, effort, and money. For that reason, it is only logical to assume that protecting customer lists from being solicited by former employees should be every employer's priority. Unfortunately, for many employers, their ambitious efforts to safeguard customer lists get off the ground only after the proverbial walls have been breached, and by then, it can be much too late.

As soon as you have made the decision and informed a senior or highly skilled worker who has knowledge of your clients that they are laid off or terminated, proactive measures must be taken to protect your customer lists. Terminating an employee — whether for disorderly conduct or a reduction in force — may leave the employee disgruntled about losing their job, and they may try to get back at you by handing out your confidential customer information to a competitor seeking to encroach upon your market.

Protecting Your Customer Lists With A Restrictive Covenant

One of the most effective ways to protect your customer list from being appropriated by current or former employees is by entering into restrictive covenants with your employees.

What is a Restrictive Covenant?

A restrictive covenant (also called a covenant not to compete) can be defined as a legally binding document drawn between the employer and employee, which contains non-competing clauses and provisions for shielding the employer from the possibility of losing valuable client information to a resentful former worker who might leak them to your competitors in the market. You may include such a clause in a pre-employment contract or as an added provision in a compromise agreement upon an employee's resignation or employment termination.

Restrictive covenants may take several forms, including:

  • Non-compete agreement: These restrictive covenants bar your former employees from working in similar employment for your competitor for a period of time.
  • Non-solicitation agreement: These restrictive covenants preclude your former employees from soliciting your customers and/or other employees.
  • Non-disclosure or confidentiality agreement: These restrictive covenants prohibit your former employees from using or disclosing confidential client information which they obtained while they were working for you.
How can Restrictive Covenants be Enforced in Illinois?

In Illinois if the covenant not to compete in an employment agreement is reasonable and necessary to protect your business interests from improper or unfair competition, it can be enforceable. On the other hand, Illinois courts will also consider judicial fairness to the former employee - if you attempt to make the restrictive covenant too broad by making it for too long a period of time or covering too large a geographic region, your covenant may not be enforceable. Yet another factor to consider is the position of employment of the employee. For example, senior employees or longtime employees who are more likely to be in contact with more sensitive information (e.g., sales representatives and service orientated professionals) will have more severe restrictive covenants than say a secretary or receptionist.

Restrictive covenants can also be rendered unenforceable if you fail to justify the type of interest being protected as a "trade secret." A customer list merits trade secret protection only if it contains specific client information that would be advantageous in your business but not publicly available. A mere list of customer names and addresses or information used in your day-to-day business operations is generally not deemed a trade secret by Illinois courts.

Your customer list is your company's most valuable asset and vital for the stability of your business! Don't wait before it is too late to take affirmative steps and protect this asset today!

If you have any questions about these restrictive covenant agreements, get in touch with the Chicago business attorneys at Bellas & Wachowski today. We will resolve any issues you may have regarding protecting your customer lists from use or disclosure by disgruntled former employees.

The experienced Chicago business lawyers at Bellas & Wachowski are available to help you with any questions you may have regarding protecting your customer asset and Asset Protection for Small Business Owners in general. This is important to the stability of your business and the protection of your most valuable asset – your business.

If you believe that your customer list should be protected from former employees, you should consult with an attorney experienced in this field. Contact George Bellas at 847.823.9032 or george@bellas-wachowski.com to discuss your unique business needs.