In the property management industry, where everything is deeply competitive, a critical question is whether or not a property manager is entitled to switch from one property management company to another and, at the same time, continue servicing the same condominium building with the property manager’s new employer.
For example, suppose John is a property manager of Company X and John, through Company X, services a condominium building. If John leaves for Company Y, is the condominium building still entitled to retain John through Company Y?
Effectively, the matter boils down to whether or not John is considered a key employee of Company X. If so, John, through Company Y, would be unable to service the condominium building for a reasonable period after John’s departure from Company X.
A key employee is one who is generally responsible for guiding the business affairs of the employer, is involved in the decision-making process, or has access to confidential information that, if disclosed could impair the competitive advantage that the employer enjoys. It is well established that employees in managerial roles are typically considered key employees. In order to determine whether or not John is a key employee of Company X, the court will likely consider the following questions:
- What was the extent or frequency of the contact between John and Company X’s customers and/or suppliers?
- Was John the primary contact with the customers and (or) suppliers?
- To what extent did John have access to and make use of, or otherwise have knowledge of, Company X’s customers, its accounts, pricing practices, and the pricing of products and services?
- To what extent was John’s information as regards customers, suppliers, pricing, etc., confidential?
Key employees owe fiduciary duties to their former employers not to unfairly compete or appropriate corporate opportunities. Therefore, if John, while employed at Company X, spent considerable time at the condominium building, developed meaningful relationships with the board of directors of the condominium building, and only formed those relationships as a result of his employment at Company X, John would likely be considered a key employee of Company X and unable to continue providing services to the condominium building through Company Y for a reasonable period. On the other hand, if Company X performed poorly for the condominium building, had gone through several property managers before John, and the condominium building only worked with John for a short period before John switched from Company X to Company Y, then John would likely not be considered a key employee of Company X and entitled to work for the condominium building through Company Y.
It is important to note that each case is fact-specific. Therefore, as a property management company, whether representing Company X or Company Y in the example above, it is prudent to speak with a lawyer in advance of taking any legal action in order to understand how the facts of your case would apply to the legal principles at bar.
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