Many people know that, when one leaves a job in California, the former employer typically cannot stop the former employee from working for a competitor. However, some people mistakenly believe that the right to compete includes the right to steal the former employer’s customers!
According to Civil Code Section 3426.1(d), a trade secret is “information…that [d]erives independent economic value…from not being generally known to the public…and [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” For many employers, a customer list is an important trade secret.
Subsection (c) of that Section specifies a variety of circumstances that constitute misappropriation of a trade secret, including those involving “[d]isclosure or use of a trade secret of another without express or implied consent”. Using a list of a former employer’s customer to solicit business from those customers, thus, might constitute misappropriation. This is true irrespective of whether the solicitations ultimately are successful.
Threatened or actual misappropriation is subject to injunctive relief (Section 3426.2(a)). Section 3426.3 provides that one who misappropriates a trade secret may be liable for damages equal to the amount of the trade secret owner’s losses; the amount of any unjust enrichment gained; or payment of a reasonable royalty. Twice any of the foregoing amounts may be recovered in the event of willful and malicious misappropriation.
Whether the identity of an employer’s customers is a trade secret is a matter for factual inquiry in any given case. For example, in The Retirement Group v. Galante, the California Court of Appeal for the Fourth District concluded that former employees should not be enjoined from soliciting the former employer’s customers because the identities of those customers, and their contact information, were readily available from other sources.
Bottom line: Once you leave a company’s employ, don’t use a list of your former employer’s customers unless you are confident that the list does not constitute a trade secret.
Related post: Non-compete Enforced to Protect Trade Secrets
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
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