Companies undergo major changes during their growth process, including changes in human resources; some stay, others find more attractive job offers that fit their expectations, and the company grows by hiring new workers and new minds that can contribute something significant to the corporate purpose. But what happens when former employees join the payroll of a competitor?
The Supreme Court of Justice, Civil Chamber, on the thirteenth (13th) of October 2021, led by Magistrate Aroldo Wilson Quiroz Monsalvo, was tasked with resolving a lawsuit filed by a Colombian company against a multinational corporation for an alleged diversion of clientele and business disruption by taking actions to cause its employees to resign, including its exclusive product distributor.
Now, the Court developed the concept of unfair competition in Colombia, cited Article 333 of the Political Constitution, and stated that free competition was established as a condition for the proper functioning of the economic circuit, aimed at ensuring that agents can participate according to their capabilities such as commercial prestige, product quality, professional background, business conditions, advertising, and location within the supply and demand mechanism for goods and services.
Regarding unfair competition due to diversion of clientele, it noted that Article 8 of the Unfair Competition Law, Law 256 of 1996, provides that: "any conduct that has as its object or effect the diversion of clientele from another's activity, commercial services, or establishments is considered unfair, provided it is contrary to sound commercial practices or honest usages in industrial and commercial matters." What is prohibited, then, is conduct that aims at or results in the transfer of users from another's activity, service provision, or establishment, provided it is contrary to sound practices or honest usages in this dynamic and in industry.
On one hand, the economic harm caused to a competitor by losing clientele in favor of another entrepreneur is not deemed unfair, as it is a manifestation of the principle of efficient competition in the services that any company or organization can offer, unless the affected party proves that its competitor took its clientele through dishonest and malicious acts.
On the other hand, the Court recognizes the free choice of profession or occupation for each individual, thereby noting that one cannot prevent any worker from leaving their current job to engage in other activities similar to those they performed in their previous employment and for which they are professionally prepared to undertake new ones.
It cannot be prohibited for that person to join another company whose commercial activity coincides with that of their previous job, as such conduct is not unlawful; moreover, it is expected and convenient for the development of efficiency and competition in the various sectors encompassed by the market.
Therefore, the Court indicated that the mere transfer of a worker to a rival company or the fact that they start a new company with the same or similar corporate purpose as their previous employer does not in itself constitute an act of unfair competition, as to establish such, it is necessary to prove actions contrary to honest usages in industrial and commercial matters.
However, the Court left the door open by mentioning that it is important to clarify that it is possible to agree on post-contractual non-compete clauses, strictly limited in terms of their temporal validity and naturally generating economic compensation in case of breach.
Finally, this situation demonstrates the importance of drafting an adequate employment contract, which includes all those clauses that provide clarity and transparency when entering into an employment relationship, so that once it ends, the consequences that certain conduct may entail are clear.
Prepared by: Hernando Zúñiga Motato.. Consulting Attorney.