What employees or ICs can bring to your agency

Q: An employee and an independent contractor of a competing agency want to move to our agency. I know that there are restrictions on moving clients, especially those with bookings for future travel. Are the restrictions on employees different from the restrictions on ICs? If so, what’s the difference, and what should we advise these people to avoid doing?

A: If there is a contract between the other agency and the employee, then the employee’s pre- and post-termination duties should be spelled out in the contract. The same goes for the IC: There should be contract provisions covering the transfer of clients and bookings before and after termination.

As you probably know, some states (most notably, California) prohibit post-employment restrictions on competition, and state statutes may even apply to ICs. As you may also know, the federal government has proposed to outlaw all noncompete clauses, for both employees and ICs. If President Biden is re-elected, the proposal will probably become law.

In the absence of an enforceable contract, the duties of an employee and an IC are similar but not identical. While still an employee, the worker owes a duty of loyalty to the employer. This means that the worker cannot try to deprive the company of opportunities and cannot conspire with you to help your business by moving clients and bookings. However, this duty no longer applies after termination of employment.

If the IC has no contract restricting pre- and post-termination activity, then the duties of ICs are much different: An IC has no duty of loyalty to the host and is free to try to move any clients or bookings, even bookings under deposit. Indeed, host agencies are periodically forced out of business when their ICs depart with their bookings en masse, and the host has no legal recourse against them.

Without a duty of loyalty or an enforceable contract, the IC can agree with your agency to move clients and bookings. You can even try to get suppliers to pay commissions to your agency, although you will owe the original host what would have been its share of the commission.

Now back to similarities: after termination, both employees and ICs must refrain from going into the company’s computer system to copy information such as client contacts and past-trip data. Unauthorized computer access is unlawful under the federal Computer Fraud and Abuse Act.

So, how can former employees and ICs get records of pending bookings? The answer is that they cannot do so legally unless the employer/host authorizes access and copying.

Here, in a nutshell, is what you should do and what you should tell the employee and the IC:

First, have them send you their contract for review by you and your attorney. Relying on oral assurances can result in misunderstandings and lawsuits.

Second, make sure they refrain from taking any papers or electronic files from their old agency, either before or after termination, unless their agreement allows such activity, such as when an IC agreement allows the IC to move clients that they personally solicited and secured. 

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