Mark Pestronk
Mark Pestronk

Q: Can you settle an old controversy at our agency: To whom do clients belong? Do they belong to the agency, the employee or to the independent contractor (IC) who brought them in?

Is the rule different for ICs vs. employees? Does it make any difference if a client is a family member of the employee or the IC? Does it make any difference whether the client is corporate or leisure? I understand that an employment or IC contract can specify to whom the client belongs, but what if there is no contract or the contract is unclear?

A: Clients are not property, so they cannot belong to anyone.

Therefore, as a general rule, your agency's ex-employees and ex-ICs are free to solicit and handle the travel business for any client of your agency. Conversely, your agency is free to solicit and handle the clients who were brought in by your former employees and ICs.

It makes no difference whether the client is a family member of an ex-employee or an IC. Nor does it matter whether the client is corporate or leisure.

Finally, whether the former staffer was an employee or an IC is irrelevant. Contrary to popular belief, ICs have no more rights to clients than ex-employees have.

When an employee or IC leaves, there can be a mad scramble to claim the business of the clients they have handled. The scramble is legal, and there is generally no way to stop your ex-staffer from handling the clients who you thought of as yours.

So how do you stop a former employee or IC from soliciting clients your agency handles, and how does an IC prevent your agency from soliciting clients to whom the IC brought in? First, as you already know, a contract can specify which party must refrain from soliciting or serving a given client after the employment or IC relationship ends.

Unfortunately, most such contracts are not clear about each party's duties after termination.

For example, if a contract states that clients referred by your agency to an IC will "remain the property" of the agency, the quoted words are meaningless unless the agreement also expressly prohibits the IC from soliciting or handling those clients after termination.

The second restriction on the mad scramble is for work in progress. While an ex-staffer can try to move a booking to a new agency, your agency is still entitled to the commission because it was the procuring cause of the sale.

The third restriction is for fiduciary duties. If an ex-employee was a partner, corporate officer or corporate director of the agency, he has a duty to refrain from depriving the agency of the business opportunities offered by existing clients of the agency.

Fourth, under the law of some states, a former employee who is not an officer or director has a duty not to use confidential information to his or her own advantage and to the detriment of his former employer.

However, my advice is not to try to rely on arguments about fiduciary duties and confidential information. Instead, use a contract to specify exactly what each party cannot do after termination of the relationship.


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