Customer embezzlement by one of your current or former employees: what should you do?

What should be done if a current or former employee misappropriates customers?

You are the head of a company and you notice a significant drop in orders from some of your customers, leading to a fall in your turnover. Strangely enough, the customers who have stopped doing business with you all come from the same customer file managed by one of your current (or former) employees. There’s no doubt about it: you’ve been the victim of customer misappropriation!

There are two distinct situations:

• If the employee is still in post;
• If the employee is a former employee (resigned, dismissed, etc.).

Unfair misappropriation of customers by a current employee

An employee’s duty of loyalty to his employer

Case law of the Cour de cassation has established the principle that an employee, during the performance of his employment contract, is bound by an obligation of loyalty towards his employer(Art. L.1222-1 of the Labour Code and 1104 and 1194 of the Civil Code).

This also applies when the employment contract is suspended: during holiday or sick leave.

All employees are therefore prohibited from breaching their duty of loyalty by committing the following acts:

• misappropriating customers by passing on the customer file for which they are responsible to a competitor ;
• ceasing to process customer data electronically by no longer inserting it into his employer’s software and subsequently using it for his own account;
• set up a company that carries on a competing activity and misappropriate his employer’s customers for his own benefit until he resigns.

There are many examples of this, and to determine whether your employee is in breach of his duty of loyalty, it is important to consult a lawyer who will be able to assess the facts.

Reacting to a case of customer misappropriation

In such circumstances, it becomes difficult, if not impossible, to continue the employment contract with your employee.

A dismissal procedure should therefore be put in place.

Advice from Elodie JEGOUIC, an employment lawyer at GOLDWIN:

“ In this kind of situation, as an employer, you mustn’t overreact if you don’t want to be prejudiced later on. It may seem difficult, but it’s essential to act in a reasoned and methodical way so as not to disrupt the running of your business, particularly your relations with other employees and your business partners “.

Thanks to their expertise, the lawyers at GOLDWIN will support you throughout the redundancy procedure. They will be able to determine the grounds for dismissal for serious or gross misconduct based on the facts.

Our experience in this field has taught us that it is sometimes difficult to prove that an employee has engaged in unfair competition by diverting his employer’s clientele. To remedy this, we can put our network of experts (bailiffs, private investigators, experts, etc.) at your service to help you build a solid case.

Unfair misappropriation of customers by a former employee

It is very common for a former employer to notice a drop in its order book following the departure of an employee. For example, a former employee may have been poached by one of your competitors and taken the customer file he was responsible for with him.

Former employees who have been involved in building up a customer file often think they have free access to it. They forget that their employer is the owner. They must return it at the end of their employment contract.

If one of your former employees uses unfair tactics to misappropriate your customer base, you can take action.

There are two possible scenarios:

• Case 1 The former employee is bound by a non-competition clause.

An employee must comply with the non-competition clause binding him to his former employer.

By using unfair competition to divert part of his former company’s clientele, he knowingly breaches his competition clause.

Once you have noticed that your former employee is violating his non-competition clause, take swift action. Our team of lawyers will support you throughout the procedure:

• Hypothesis 2 no non-competition clause

In the absence of a non-competition clause, there is nothing to prevent a former employee from contacting his former employer’s customers or setting up business near his former employer while offering a similar activity. However, such actions may be culpable if they are accompanied by acts of disparagement or systematic or methodical canvassing.

In this case, you should take your former employee to the relevant courts on the basis of extra-contractual liability (Art. 1240 and 1241 of the Civil Code).

In this case, it is important to prove that the former employee was at fault, in particular by demonstrating that his actions to displace your customers were unfair. It is also essential to quantify your loss and, finally, to establish the causal link. (For more details, please see our article on the subject by clicking here).

Preventing unfair behaviour by an employee

In order to avoid such situations, GOLDWIN’ s lawyers will be on hand to help you prevent such risks.

As you will have read above, inserting a non-competition clause into your employees’ employment contracts is a formidable weapon.

According to the French Supreme Court, a non-competition clause is only valid if :

• it is essential to protect the legitimate interests of the company ;
• it is justified in the light of the employee’s duties, particularly if he is in direct contact with customers;
• be limited in time and space;
• provide for financial compensation.

(Court of Cassation, Civil Division, Commercial Division, Appeal no. 19-25.794, 30 March 2022).

Other solutions exist! Our team of lawyers will take the time to understand how your business operates, your development objectives and the sector in which you operate, so that we can offer you tailor-made solutions.