Beware the departing employee

Over the past three months, the sales manager has been absent more than usual. He generated 30 percent fewer sales in the quarter. He has been unresponsive to his fellow employees for several weeks, and he has not returned calls for three days. You receive a call from your service manager, who reports that one of the company’s largest customers just transferred its account to a competitor. Apparently, the sales manager plans to go to work for the competitor. After you e-mail the sales manager, he replies that he is resigning effective immediately.

A departing employee can significantly damage your business. Sales and service people develop strong relationships with customers and can entice them to follow when they join a competitor or start a competitive business. Technical employees, like engineers and operations people, often possess and have knowledge of confidential information that is highly valuable to a competitor.

Protecting the company against a departing employee should start long before the employee departs.

Employees should be required to sign a confidentiality agreement, preventing them from using or disclosing confidential information and requiring them to return all confidential information and company property before they leave.

Companies also should implement other measures to protect their confidential information, including:

• Adopt corporate policies concerning confidential information

• Do not disclose confidential information to third parties without a non-disclosure agreement

• Provide physical security for documents that contain confidential information

• Provide electronic protections for confidential data

• Limit access to and distribution of confidential materials to only employees who need the materials to perform their jobs

• Mark confidential materials with a “Confidential” legend

• Review presentations and articles before publication and remove confidential information

• Train employees about confidential information and their obligations to protect it

• Periodically audit the company’s confidential information, and adjust the measures to protect it

• Conduct exit interviews and collect confidential information and company property from departing employees.

While it is true that these agreements cannot be used with all employees, a well-drafted non-competition agreement can be, and often will be, enforced by a court with an injunction. In particular, non-competition agreements designed to protect goodwill with customers and/or confidential information are entirely appropriate and routinely enforced.

Protecting the company from a departing employee requires prompt action when you suspect or learn that the employee is leaving. Because so much information is communicated and stored electronically, the company should secure the electronic devices used by a departing employee at the earliest opportunity.

For example, the company should obtain and forensically image the employee’s laptop and hand-held devices, secure and copy the employee’s e-mail account, make a forensic image of the employee’s PC, obtain and image electronic storage devices used by the employee and limit or terminate the employee’s access to the company’s e-mail and computer networks.

Prompt litigation also is appropriate if you know that the employee has engaged in misconduct. The company can ask a court to enter an injunction to enforce a non-competition agreement, and require the return of confidential information and company property.

An injunction is quite effective, particularly if the company can get into court and obtain an injunction before the employee starts working for the competitor. In addition to confidentiality and non-competition agreements, businesses are protected by the trade secrets law, and all employees owe a duty of loyalty to their employers.

Cameron Shilling, a shareholder at McLane, Graf, Raulerson & Middleton and a member of the Litigation Department and the Employment Law Group, can be reached at 603-628-1351 or