The Problems Employers Face When Losing Critical Employees

Every company fears, and eventually, faces the loss of one or more of its key or most critical employees. The reasons, of course, should be obvious.

These are the people upon whom your company relies most often in its day to day operations, decision making, business development and crisis management. They are typically the employees we often refer to as the “brains” of the company, and also, not coincidentally, they are the employees who are privy to the core confidential information which drives your business’ success.

When such a critical employee leaves your company, whether he or she decides to work for a competitor or strike out on their own, you should be prepared to take steps to safeguard your company’s confidential and proprietary information, and protect it from being used to potentially undercut your future business goals and objectives.

Today, nearly all businesses employ the use of confidentiality, non-disclosure and non-competition agreements. These written agreements are typically entered into with employees, including key employees such as managers and executives, for example, when the employee is hired. They are enforced, if at all, after the employee leaves the company or is terminated, and has performed or is threatening to perform some act which is competitive with the company’s business interests and which he or she has agreed, in writing, not to undertake.

The problem with after-the-fact reliance on such agreements is that 1) the agreement cannot be legally enforced until the employee has actually violated it, and 2) a court may determine that the confidentiality, non-disclosure or non-competition agreement, or some part of it, is unenforceable, rendering the agreement largely useless for its negotiated and intended purpose. Consequently, post violation enforcement of a confidentiality, non-disclosure or non-competition agreement against an employee who has already resigned from your company, such as a departing critical employee with intimate knowledge of your client/customer database, systems, pricing structure, trade secrets and other details of your business, may simply not be enough protection. Employers should therefore be proactive, and take the appropriate steps, when such a key employee decides to leave the company, to safeguard the most vital components of their business—the information upon which it relies to succeed.

Fortunately, there are ways to help ensure that you put yourself in the best position when a critical employee decides to leave, so that you can minimize the risk of loss of your confidential and proprietary information before a conflict with a former employee develops. Here are a few things you can do to streamline and simplify the process for information gathering and making sure that employees understand their obligations to your company upon making the decision to leave.

1. Terminate email/network access and search the employee’s e-mail. It may seem obvious, but when any employee departs, let alone a vital employee with access to the Company’s client and customer lists, trade secrets and other proprietary data, the first thing you should do is make sure that the employee no longer has access to your computer network and his or her company email account. Further, you should have the employee’s company email account searched by a forensic information technology specialist who can determine whether the employee has been sending company confidential or proprietary information to his or her personal email.
2. Conduct an exit interview. A non-hostile exit interview is a great way to gather information about the departing employee’s future plans, what company information the employee has obtained during his or her years of employment, and what business information the employee may have in his or her possession at the time of resignation.
3. Review the employee’s signed agreements. After conducting the exit interview, and once you have an idea of the employee’s future plans, carefully review the employee’s signed agreements—confidentiality, non-disclosure, non-competition agreements, and any other signed employment agreements. This is the time to determine whether any of the future plans which the employee has disclosed during the exit interview violate or will likely violate the employee’s signed employment agreements.
4. Remind the employee of his or her obligations. Separately from the exit interview, but prior to the employee’s actual departure, have the employee sign a document outlining the discussion that took place during the exit interview, and confirming such facts as: 1) that the employee had access to the company’s confidential or proprietary information during his or her employment; 2) that the employee agrees not to disclose the company’s confidential or proprietary information; 3) that the employee acknowledges his or her signed employment agreements, including all restrictive employment covenants contained therein; (4) that the employee has returned all company property.

No set of anticipatory plans, processes or procedures which a company may implement can be guaranteed to prevent a determined vital “inside” employee from resigning, appropriating company confidential information and competing against the company with it, but by following these steps you can help minimize the risks and possibly deter such employees from doing so.

For more information about what you can do to best protect your company against the loss of its confidential and proprietary business information resulting from departing employees, please contact Widerman Malek, PL.