None of us like to plan for unpleasant events in the future. That human tendency is evident in the number of individuals who are totally unprepared for the loss of a loved one, a natural disaster or the end of a marriage. From a business perspective, this comes up frequently with respect to departing employees. Employers sometimes delude themselves into thinking that their current workforce – and especially the key personnel within that workforce – will remain with them forever. Decision-makers do not think about a star performer getting a better offer from a competitor or having a falling out with her/his supervisor.
However, change is an inevitable fact of life generally and the employment arena specifically. Employees – even those who value and exhibit loyalty – rarely spend their entire careers with one company. So what does a smart company do right now to prepare for the possibility that a key employee is going to move to a competitor at some time in the future? Here are some best practices:
1. Have agreements in place.
The best way for a company to protect itself against competition by former employees is to have restrictive covenant agreements in place. Such agreements can deter employees from leaving in the first place (or competitors from hiring them). If they choose to depart, then the agreements can prevent the employee from: (a) competing in certain territories and/or on behalf of certain competitors; (b) soliciting customers; (c) taking co-workers; and (d) using or disclosing confidential information. It is important to note, however, that state laws vary regarding the enforceability of such agreements, so you should work with legal counsel to determine what you can do in your agreements. For instance, certain states have rules in place that prevent the use of non-compete restrictions with many categories of employees. In general, it is a good idea to consider which employees pose a potential competitive threat, then use detailed agreements with them, whereas lower-threat employees should sign shorter, less burdensome agreements.
2. Think through your key information and take steps to protect it.
To stop an employee from using or disclosing confidential information, you need to show that information is truly non-public. If other employees are permitted to walk out the door with that information, then such a showing will be very difficult. Likewise, if the information is provided to third parties without safeguards in place, then the information will lose its confidential character. Thus, it is important to ask yourself two questions. First, what information would be most useful to your competitors if an employee left with it? Second, if asked on a witness stand by a judge (or by your attorney while drafting an affidavit) “how many measures do you take to ensure that the information remains private?,” what could you say in response?
3. Make clear that employees cannot misuse the company’s computer system.
With the increased use of the federal Computer Fraud and Abuse Act and analogous state law computer protection statutes, employers are learning the importance of putting employees on written notice as to what they are not authorized to do on the company computer system. This includes both taking files from the system (such as by e-mailing files out as attachments or saving them to thumb drives) and deleting files prior to departure. The key to unlocking the power of federal and state computer protection laws is showing that the employee was on notice that he/she was not authorized to perform certain acts on the system.
4. Pay for the employee’s cell phone.
In the grand scheme of things, it is penny wise and pound foolish to have a key employee pay for his or her own cell phone plan. If your company maintains the account, then it can: (a) terminate the account when the employee leaves so customers cannot reach out to her/him; (b) determine who the employee has been contacting in her/his final weeks with the company; and (c) stop the employee from walking out with a de facto customer list on her/his phone.
5. Preserve the hard drive.
Computers are expensive. Hard drives are not. The moment that an employee resigns and says that he/she is going to a competitor, pull the hard drive out of her/his computer and keep it in a drawer. You’ll be surprised what a professional forensic examiner can find on it.
The issue of protecting your company against the prospect of former employees competing unfairly against it is a classic example of the maxim that an ounce of prevention is worth a pound of cure. Relatively small expenditures of time and money on the front end can either deter an employee from seeking to exploit your company’s key relationships and information or position the company to recover if such exploitation does take place. The critical first step is to plan for an unpleasant possibility.
Michael Elkon is Of Counsel in the Atlanta office of Fisher & Phillips LLP. He represents management in all areas of employment law in state and federal courts, as well as before state and federal agencies. Michael specializes in matters concerning employee defection and recruitment, including litigating injunction and damages actions relating to covenants not to compete, non-solicitation and non-disclosure provisions, unfair competition, employee raiding, trade secrets, the duty of loyalty, the Computer Fraud & Abuse Act, and state computer protection statutes. Michael has litigated dozens of employee defection and recruitment matters in numerous state and federal courts. In addition to litigating, Michael drafts restrictive covenants for numerous different types of agreements and counsels clients on protecting their confidential information and customer relationships, as well as recruiting talent. Michael was selected for inclusion in Georgia Super Lawyers – Rising Stars every year since 2010.