When Key Employees Leave to Work for a Competitor

Ten Steps Employers Can Take to Protect Themselves
by John Egbert

At one time or another, most employers are going to experience the departure of one or more key employees to work for a competitor or to start a new competing entity. Such a departure can have significant adverse effects on the employer’s operations and success. Sometimes, the departing employees will have engaged in damaging misconduct leading up to their departure. However, there are steps that employers can take both in advance and at the time of such a departure. Here are ten of them.

Inventory the company’s intellectual property that gives the company a competitive advantage (trade secrets and other confidential and proprietary information).

Determine which employees have access to that information and have them sign non-disclosure and confidentiality agreements. Such agreements should clearly describe the important intellectual property to be protected, have the employees acknowledge the confidential nature of that property, and have the employees agree they will never disclose that information to third parties, either during their employment or after it has ended.

Consider using other restrictive covenants, such as non-compete and non-solicitation provisions where appropriate.

Reassess periodically. Promotions may change the information to which particular employees have access, and thereby change the need for some kind of contractual protections. What used to be confidential may not be now, and new, highly confidential information may be developed over time.

Whatever safeguards and procedures are developed, make sure they are actually implemented.

Establish an exit interview procedure for departing employees. During that procedure, attempt to learn where the employee will be working next and remind the employee of his or her contractual obligations.

Secure computers, cell phones and other devices used by the departing employees, as well as back-up tapes, security data (including surveillance camera recordings and access logs) and any other information that might help the company determine (and, if necessary, prove) whether the employees engaged in misconduct leading up to their departure.

Where appropriate, disable auto-delete functions to avoid losing helpful evidence.

Interview witnesses, including co-workers left behind. Particularly when a group of employees depart together, there will frequently be one or more employees who were invited to join the departing group but chose not to go (or who asked to join the departing group but were not invited). These individuals will often be the source for a lot of critical information.

If there was misconduct by the departing employees (or if there is reason to suspect misconduct), get in-house or outside legal counsel involved.

The law generally protects employees’ right to change jobs and disfavors restrictions on their ability to compete with former employers. However, the law also provides significant protections for employers. Departing employees may not actively compete while still employed, they may not plan their move on company time, and they may not violate enforceable restrictive covenants even after their departure. Putting appropriate protections into place in advance and being ready to act quickly when a departure occurs can go a long way toward protecting the employer’s assets and successful ongoing operations.

John Egbert is chair of Jennings, Strouss & Salmon’s Labor and Employment Practice Group. He is also currently a member of the firm’s management committee, and previously served as General Counsel.

 

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