Saturday, April 23, 2011

Clean Departure Key To Minimizing Liability

I met with a new client yesterday who presented a non-compete problem that I see everyday:

(1) Client has an exciting new job opportunity.
(2) Client has an agreement with significant enforceability problems.
(3) Client and potential new employer have taken steps to avoid direct competition and to ensure ex-employer's interests are still protected.

But still, the new job arguably falls within the terms of the non-compete agreement. This is where the method of departure can tip the balance from a high-risk case to one that contains relatively low risk of liability.

What are the keys to a clean departure?

(1) Return all employer information, whether stored electronically or in paper. This may require the employee to work with the IT department to make sure a home computer is scanned and cleaned properly. Employees should not assume that an undisclosed, mass deletion of data is acceptable.

(2) Be honest and forthright in an exit interview. If you mislead your employer about your post-termination plans, that leads to the inference that you are hiding something.

(3) Make your last 30 days of employment your absolute best. Don't mail it in with customers, vendors, or co-workers. You don't want your employer arguing that as you prepared to leave to a work for the competition, you went in the tank with the company's five biggest clients.

(4) Work out an agreement with the new employer that protects your ex-employer. Some clients express surprise at this, but it is essential. Your new contract should require you not to use any confidential information of any ex-employer and should prevent you from bringing anything proprietary onto the new employer's premises. Ideally, it should restrict your work activities so that there is some separation of duties between your new job and previous job. This could, for instance, limit your work with a category of customers or a particular product until a non-compete period has passed.

(5) Comply with the notice and resignation provisions in your current employment agreement. This may require 30 days' notice or impose a transition obligation. Don't ignore these terms.

These are illustrative steps for an employee (and a new employer) to consider. If an employee finds himself or herself embroiled in a lawsuit, a judge ruling on an injunction motion will give careful weight to the departure and will likely consider the factors above in determining what hardship may befall a company if its non-compete is not enforced. My experience is that a court also will more carefully look at the terms of the covenant and try to find some overbreadth if the employee has acted responsibly and done his or her best to make a smooth transition.

1 comment:

  1. Great advice! These will surely allow smooth transition and lessen the risk of liability under a non-compete covenant.