Employer customer lists: “Whatever you say, dude.”

You’re looking to hire a new salesperson. Scott Salesperson comes in to interview. He currently works for your top competitor.

“Scott, do you have a non-competition agreement?”

“No.”

“Scott, do you have a confidentiality agreement?”

“No. In fact, I have a list of my own customers that I could sell to if you hire me.”

Sounds good, right. But, before hiring Scott, do you have any obligation to independently verify the facts that Scott has represented?

New Jersey employers will definitely want to click through because, last week, the New Jersey Supreme Court answered…

* * *

Jean Millman was a sales representative Target Industries. Then he got fired.

Millman then went to work for Target’s competitor, Polymer Packaging, Inc. Polymer knew that Millman had worked for Target. So, Polymer asked Millman whether he had either a confidentiality agreement or a non-compete clause. Millman assured Polymer that he had neither. Polymer did nothing to verify independently the truth of that assertion.

Millman brought with him to Polymer a list of Target customers that he represented was his own. Millman subsequently sold products for Polymer to former Target customers.

Target then sued Polymer.

What do you think? Is is Target entitled to relief against Polymer? According to the NJ Supreme Court, no:

In the context of that claim, even though the customer list would be considered to be confidential, there remained a genuine issue of material fact concerning whether these defendants were aware that Millman s list was Target s proprietary information as opposed to a personal contact list that she had developed over the years.

* * *

Nor do we find a basis on which to impose on defendants, as plaintiffs request, an affirmative duty to undertake an inquiry, independent of the information given to them by Millman, as to the source of the customer list that Millman had. Cast as a challenge to the adequacy of the jury instruction on the issue of whether defendants acted in good faith, plaintiffs contention is in actuality a request that we recognize the existence of a new duty of inquiry.

* * *

Our consideration of this argument reveals no ground on which to impose a duty of independent inquiry upon an employer, like Polymer, faced with an otherwise unremarkable representation by a prospective employee, like Millman, that a list of contacts is her own.

The case is Fox v. Millman.

I agree that, generally, placing the duty on an employer to inquire further regarding such representations from a new employee seems a bit much. But, these are questions that an employer needs to ask a potential new employee, especially in a field, like sales, where restrictive covenants are so prevalent. It also makes sense to have these new employees sign agreements affirming that they are not bound to / will not violate any existing restrictive covenants.

There may be no duty of independent inquiry — at least in NJ, not pinning your new hires down on these subjects can be a recipe for disaster.