Can You Prohibit Former Employees From Contacting Your Referral Sources?

Most business owners understand the importance of protecting those things that make their business run. That may include their trade secrets, customer lists, their time tested processes and procedures, and all the things that just make their business work.

But what about your referral sources? Is it possible to tell someone working for you now that should they ever leave your employ, they cannot contact referral sources?

The Problem With Referral Sources

Referral sources are not “yours,” the way, say, trade secrets or confidential information may belong to your company. A referral source could send you business every day of the year, and then tomorrow opt to never send you a referral again, and thus you don’t have any established contracts with referral sources.

On the other hand, they certainly have been cultivated by your work, relationships, and goodwill, and thus you may not want someone leaving your company and then cozying up to your referral sources to have them send the former employee their business referrals instead of you.

What Have Courts Said About Referral Sources?

Some courts have said that you can legally prohibit someone from contacting your referral sources after their employment with your company ends. In fact, in light of the recent national ban on noncompete agreements, this may actually be a good strategy to protect yourself from employees leaving to compete with you.

But there are some cases that do say otherwise. In one case, a former employer tried to keep a former employee from contacting referral sources, with a prohibition written as part of a larger noncompete agreement.

Because noncompete agreements require that a legitimate business interest be protected, and the court found referral sources were not a legitimate business interest, the court said that they could not be protected.

But that was in light of a noncompete agreement. Other courts have found that companies can protect their referral sources and have found them to be legitimate business interests.

What Should You Do?

How do you know which way a court may rule in your case?

The first thing is to make sure that in any contract, the other side agrees, in writing, that referral sources are a legitimate business interest—that language should be written into your contract. And to the extent that prohibition on contacting referral sources is in a noncompete agreement, this is a bad idea, as noncompete agreements are now invalid.

Your contract should detail why referral sources are a legitimate business interest—a short statement saying that your company has spent time and money cultivating the relationships with the sources. If the referral source is hard to find, or in a rare industry or field, make sure to say that as well.

Remember that contracts take consideration. So if you’re asking a current employee to sign an agreement not to contact your referral sources, there will have to be something offered to the person signing (the employee) in consideration for his or her agreement not to contact your sources.

Protect your business interests. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

casetext.com/case/hiles-v-americare-home-therapy-inc

law.justia.com/cases/florida/fourth-district-court-of-appeal/2015/4d14-3872-0.html