Employee Duty of Loyalty to Employer: Customer Solicitation

An Employee Solicited Our Clients Before Leaving the Company

In many industries when an employee leaves a company, the clients that they interfaced with will follow them. But what if the former employee personally solicited the clients, prior to leaving their original company? Is that considered a breach of their duty of loyalty?

When an employer accused a former employee of just that, the Court of Appeals of Minnesota delved into the controversy. What does an employee’s duty of loyalty prevent the employee from doing? The Minnesota Court of Appeals answered this question and provided additional guidance:

An employee’s duty of loyalty prohibits her from soliciting the employer’s customers for herself, or from otherwise competing with her employer, while she is employed. See, e.g., Sanitary Farm Dairies, Inc. v. Wolf, 261 Minn. 166, 112 N.W.2d 42 (1961). Employees who wish to change jobs or start their own businesses, however, should not be unduly hindered from doing so. See, e.g., Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 568-69 (1978). An employee has the right, therefore, while still employed, to prepare to enter into competition with her employer. See Sanitary Farm Dairies, 261 Minn. at 175-76, 112 N.W.2d at 48-49.

There is no precise line between acts by an employee which constitute prohibited “solicitation” and acts which constitute permissible “preparation.” See, e.g., C-E-I-R, Inc. v. Computer Dynamics Corp., 229 Md. 357, 183 A.2d 374, 379 (1962). Because of the competing interests, the actionable wrong is a matter of degree. Cudahy Co. v. American Laboratories, Inc., 313 F.Supp. 1339, 1346 (D. Neb. 1970). Whether an employee’s actions constituted a breach of her duty of loyalty is a question of fact to be determined based on all the circumstances of the case. See Sanitary Farm Dairies, 261 Minn. at 175, 112 N.W.2d at 48; Maryland Metals, 382 A.2d at 570 (determination “must be grounded upon a thoroughgoing examination of the facts”).

See Rehab. Specialists, Inc. v. Koering, 404 N.W.2d 301, 304–05 (Minn. App. 1987).

As you can see, the line between illegal customer”solicitation” and legal “preparation” to compete with an employer can get fuzzy. Whether an employee is breaching their duty of loyalty, depends on the specific facts of the case. Consult with an attorney to explore your case further.