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Case Study: Sales Director has Left and is Poaching Clients

Our Sales Director has left our business, but we have reason to believe he's poaching our customers. Is there anything we can do?

Y Ltd was an engineering business. They operated a sophisticated pricing scheme, which meant that their customers were tied into the business for 12 months.

Their Sales Director had left the business to work for a competitor. He left in April, but in July Y Ltd noticed that a number of their customers had chosen to take their business elsewhere. They realised that those customers had been assigned to the ex-Sales Director's account, and worryingly, 4 large customers from the same account were due to renew in 2 months' time.

Another customer had also informed Y Ltd that their previous Sales Director had contacted them recently saying that he could undercut Y Ltd and tie in the customer for 6 months rather than 12.

Our Advice

Y Ltd provided us with a copy of the Sales Director's employment contract. The Sales Director had a number of restrictive covenants preventing him from poaching customers for 6 months post termination. Y Ltd wanted to be compensated for the business they had lost and they wanted to prevent him poaching the customers' accounts that were coming up for renewal.

We wrote to the Sales Director threatening legal action, and we asked him to sign undertakings that required him to disclose a list of Y Ltd's customers he had approached, a list of Y Ltd's customers that had agreed to do business with him, and an undertaking that he would not contact any of Y Ltd's customers whilst he was in his restricted period. Initially the Sales Director refused to sign, but he appointed a firm of solicitors to represent him.

We recommended that Y Ltd considered applying for an injunction to prevent the Sales Director from approaching their customers, given the imminent threat in relation to 4 customer accounts that were due to be renewed.

We then wrote to the Sales Director's solicitors to advise them of Y Ltd's intention to apply for an injunction.

Eventually, the Sales Director signed the undertakings. Once the dust had settled, Y Ltd decided not to pursue the Sales Director for damages in relation to the customers they had lost, as those customers were not lucrative to Y Ltd.

However, Y Ltd was really pleased with the result, as they managed to retain the business from the 4 large customers that were coming up for renewal.

Y Ltd thanked us for how quickly we had managed to turn this case around, as from the initial meeting with Y Ltd, we had managed to achieve signed undertakings within one week.

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