Our industry is renowned for the heated debates and disputes that often arise between agency principals and employees when it comes to data ownership. Data is referenced as current and past “clients” which belong and are presumed to be “owned” by the agency principal.
The disputes are often accompanied by restraint of trade conditions that are included in employment agreements. These conditions outline and imply that employees leaving an agency are not permitted to work in the immediate area and for a nominated period. Whilst I hold strong views on the subject, I’m not here to debate the validity of claims from either side. What I will say, however, is that from my personal experience, I believe the “data” claims are unwarranted and at best unnecessary.
Whilst I am not suggesting or providing any legal advice on the matter, I share my views and provide suggestions on how both employers and employees can navigate and help avoid conflict.
The employee perspective
Of course, it all starts with the employment agreement and the restraint of trade and intellectual property clauses. Most clauses indicate that all “contacts” that an employee has made during the term of employment belong to the agency. On termination, employees are not allowed to prospect or engage actively with those contacts.
As the employee, the best way to tackle this situation is to seek professional advice BEFORE signing the employment agreement. Just because the agreement includes a restraint of trade clause, it doesn’t mean it cannot be removed. Have an open and transparent conversation before commencing the relationship and entering a potentially binding agreement.
In many instances, most employees do not fully understand the clauses, their implications, and their enforceable nature. They, therefore, unwittingly proceed to sign agreements when presented to them as an acceptable practice. It is natural for an employee to be excited about the employment opportunity, and the last thing most employees think about when they first start is what happens when or if they ever leave. Most wouldn’t even realise or have an understanding of what a “restraint” or the definition of what a “client” is in the context of the restraint clause.
Should you find yourself in this situation, do not plead ignorance. “I didn’t know what I was signing,” unfortunately, won’t cut it. Even worse, do not, under any circumstances, “download” the company’s data. Besides being illegal, it’s morally and ethically wrong. The best way to navigate this situation is to once again, seek professional advice and sit with the employer to come to a mutual and professional understanding. It may require some compromises from both sides, but it’s far better than entering into a protracted legal dispute that will cost both sides financially and emotionally.
The employer perspective
Now, as an employer myself, I understand the conundrum that occurs when employees (sales agents in particular) come to you and hand in their resignation. It is not a great feeling, and the possible misuse and/or “theft” of confidential information and “contacts” can be concerning.
However, this is what I have learnt from my experience in dealing with exiting employees. In the first instance, I take a very pragmatic view and approach to data ownership. In the majority, if not all cases, there is nothing to worry about. Outside of complete downloads of entire databases and unethical conduct, should exiting employees become and/or join the opposition, with or without restraints, the impact is often minimal.
Additionally, employers need to also consider that restraints have use-by-dates. Post these dates, former employees will be able to operate in opposition without restraints. Simply put, it’s a matter of when not if. So when you put it into a financial perspective, the cost of pursuing an ex-employee for potential losses (ones that are difficult to quantify as well) does not make commercial sense.
It’s for that reason, and because of the difficulties that manifest both emotionally and financially, we do not apply restrictive covenants that restrict former employees from working. We actually do not believe it’s fair or just. Additionally, we use this approach as a strategy to attract and recruit new team members. When recruiting, we use data ownership as a benefit and point of difference to separate us from our competitors, and it works.
But what about the client?
Depending on which side of the fence you sit on, employer or employee, the discussion and debate of “who owns the data” will always be disputed. However, data is not just data. They are consumers, and I find it difficult to convey to potential clients that somehow they are “owned” or “belong” to any particular agency. I am confident to say that if a client is told that they cannot use a particular agent because of a restraint clause, I’m not sure how eager or willing they would be to engage with the agency enforcing the restraint; and for that matter, how happy they would be. Who are we to take that right away from the consumer? Equally, who wins in this situation or is it just used as spite?
I understand that businesses want to protect their interests, but there is more at play than just simply exercising a restraint of trade. It is reputation and integrity. I also encourage business owners to remind themselves of when they first left their former or initial employer to venture out on their own. Just because they may have had a restraint, doesn’t mean that they have to do the same. I think we all need to move with the times.
In conclusion, the debate will certainly continue and much to many legal firms advantage as they get paid for helping to resolve these issues. The good firms, however, will advise their clients to find a commercial resolution before racking up thousands of dollars in legal costs.
However, prevention is always the best cure. If you are an employee, ensure you have favourable terms in your employment agreement so that when or if you choose to exit, there are clear rules of engagement. The other option is to sometimes sit it out, abide by the restraint, and then simply start your own business (this is an unashamed plug for ourselves!). When you do that, you can accumulate as many contacts as you like.
Wishing you every success in your real estate career.
Manos Findikakis is CEO and co-founder of the Eview Group.