Who 'Owns' The Client? Are Staffing Agencies Vulnerable To Their Own People?

For a temporary help, recruitment or staffing agency, acquiring talented recruiters to help grow the business is one of the key elements for success. However, equally as important is how to prevent a top recruiter from walking out the door with easy access to the agency's book of business when she decides it's time to leave.

Recruiters are the ones on the front lines, working directly with new and existing clients and getting to know the ins and outs of their businesses to find the most suitable job candidates for the clients' needs. The connections developed by the recruiters make the agency vulnerable in the event the recruiter leaves to join a competitor or establish her own business.

This begs the question: how can an agency protect that book of business after the recruiter has parted ways with the company? Recent case law has reinforced the utility of non-solicitation agreements as tools for staffing agencies to protect against disloyal recruiters.

Non-Solicitation Agreements

The general consensus in Canada is that, absent contractual obligations to the contrary, a departing employee is entitled to solicit and do business with the clients she dealt with at her prior employer, but is restricted from removing lists or other confidential information from the employer. Without a prior agreement in writing, the distinctions that need to be made to determine rights and obligations in this context can lead to disputes. The difficulty in identifying which information a recruiter can use and who they can solicit, and the potential for tracked and expensive litigation should encourage agencies to use well-crafted confidentiality and non-solicitation agreements. These agreements identify which information is confidential to the agency, the clients which are subject to the restriction and the period of restriction.

In order for a non-solicitation agreement to be upheld a court must determine that the agency has a legitimate proprietary interest warranting protection, and that the restriction is reasonable as to length and scope.

Proprietary Interest

It has been noted by the courts that the staffing industry is not one that automatically gives rise to a proprietary interest in relationships with clients as they often use multiple agencies and seldom develop strict loyalties to a particular agency.

However, a recent case from England, East England Schools CIC v. Palmer [2013] EWHC 4138 (QB), held that a staffing agency's relationship with its...