Thursday, December 8, 2016

Year-End Extravaganza (Part 1): Top 10 Mistakes Employees Make When Leaving to Compete

This year, I'm going out with a bang.

The end of each calendar year presents bloggers like me with an opportunity to go big and to avoid being too...meta. I've traditionally featured Year-End Top 10 lists each year since 2008 when I first started writing this blog.

No different, this time around. Let's face it, 2016 sucked in a lot of ways. So to try and get a running start for 2017, I thought I'd do four year-end columns. Think of it as sprinting the last mile of a 10k or buying your spouse a really expensive stocking stuffer. Some of my posts will be in the mold of what I've done in the past, and one is something different that I thought of while driving home last night that adds a bit of a twist to my year-end tradition.

The first installment of this year-end review tries to summarize a lot of what I write and what I observe in my day-to-day practice: common mistakes that employees make when jumping ship. Here are the top 10:

  1. Getting legal advice from a friend. I've heard some variation of this many times: "I coach basketball with this guy, and he told me that Illinois is a right-to-work state and that noncompetes aren't enforceable." There are about ten things that irk me in that sentence, but the big picture is this. Your pal, even if he draws up brilliant in-bounds plays during timeouts, shouldn't be giving you legal advice on a difficult area of the law. He may be shrewd when it comes to how to get out of a traffic ticket, but not so much when figuring out noncompetes. Virtually any street-lawyer advice is sure to be misguided, incomplete, and flippant.
  2. Seeking legal advice too late. This mistake is related to the first one. The individual clients I've been able to help the most come to me early, often when they're exploring whether to take a new job or even whether to interview for a new job. An attorney hardly can mitigate risk (and cost) when his or her client already has done eight bad things on the way out the door.
  3. Forwarding e-mails to personal accounts. Speaking of bad things, the timeless practice of forwarding work e-mails to a personal web-based account has fostered more litigation and more disputes than just about anything I know. By now, one would think that either technological innovation or common-sense would have kicked in, but apparently we're all too lazy. In any event, this short-cut to a competitive edge (a) harms an employee's credibility, (b) is easy for a court to understand, (c) pisses off the employer, (d) is never easy to explain, and (e) requires virtually no effort on the employer's part to discover (even deleted Outlook items can be recovered without hiring a forensic expert).
  4. Making assumptions about "personal" information. Related to the e-mail thing. Employees often want to download or copy personal information from a work computer to a separate device. It's amazing to me how many employees keep their tax returns, little league stats, and kids' pictures on their work computer. Why? But anyway, those who do often decide they'll just transfer data without informing management. The problem is that, even when innocent, the employer may not know what data the employee is moving to a personal device. In a notorious competition case, an employee hid his employer's trade secrets in a file called "chocolate chip cookie recipe" and downloaded those for his own use. So employers are not just going to look at file names and assume that nothing bad happened. Just as problematically, employees may start out with the intent to move some personal information but they often blur the line between personal and professional. Simply because you worked on that spreadsheet doesn't mean its yours. But often there's an insatiable desire to take this information, particularly since it's so easy to do so. Regardless, any sort of data transfer or personal device plug-in is going to look suspicious. Here's an idea: just ask human resources to watch or help you with getting personal information off the work computer. Not hard.
  5. Failing to obtain agreements. This one often shocks me. Many employees never keep agreements they sign, even though they know of them and know they're important. And many never request their agreements upon departure. Employees have a right to access their personnel file (in Illinois, if not in other states) and need to know their legal obligations. Fear of tipping off an employer about post-departure plans is really a crummy excuse for not understanding those obligations.
  6. Trusting new employer's advice. We've established that employees often seek legal advice from their non-attorney friends. Just as often, they vet their non-compete only with the new employer. Here's a newsflash. That employer may not be any more informed than the buddy you coach basketball with. It may not have sophisticated legal counsel. It may not even have legal counsel. And it certainly is not going to look at all the relevant legal, economic, and practical issues from the employee's perspective. The employer may, after all, make a calculated risk that the employee can bring in new clients, and if legal action results, well, then, it could decide to just cut the cord and fire the new worker it assured had nothing to worry about.
  7. Telling clients of future plans. This is a very common problem with sales employees. Clients tend to view their sales person as a key point of contact. That's why, in fact, courts will enforce reasonable restrictive covenants. Employees often find that it's harmless to tell contacts of an impending departure. Many times, they go beyond merely informing them of the departure and want to ensure that the relationship continues. Not only does this type of communication provide an employer with much-needed evidence of competition, but it also could be a breach of the duty of loyalty (which exists independent of any contract). After all, an employee owes a strict duty of loyalty through her last day of employment. Pre-termination planning often is viewed as disloyal under the law.
  8. Lying about departure plans. I would estimate that at least 40 percent of competition disputes have this as a common fact. Employee tells employer during an exit interview something along these lines: "No,  I'm not going to stay in the industry. My brother-in-law and I are starting a real estate company." Not. Good. That may have the short-term benefit of throwing the employer off the employee's scent for a week or two, but inevitably the employer will find out what's happening. And, even if there are legitimate challenges to a non-compete, this type of dissembling will hurt an employee's credibility very badly.
  9. Burning bridges on the way out. The time period between notice and departure is particularly harrowing. For many employees, it's not a period to ensure the company has a smooth transition of accounts or projects in the pipeline. It's about settling scores and airing dirty linens. It's a time to tell the boss she's incompetent and lazy. It's a time to complain about the holiday party, the expense reimbursement program, the crappy health insurance plan, and how no one knows just what the hell Bill in accounting does every day. Though perhaps it seems petty and trite, this type of score-settling behavior only encourages an employer to seek a pound of flesh when it can.
  10. Not telling counsel the "bad" facts. Even in strong cases, bad facts exist. Every one. Employees, who often have no experience with legal counsel, have a perverse sense of counsel's role. We're not cheerleaders. We're advocates, but our job is to provide counsel. If an employee hides bad facts or provides an explanation that is unreasonably dismissive (or, just as often, incomplete), we can't counsel. When those bad facts come out (as they always do), then the relationship between lawyer and client can suffer immeasurably. The best clients put all the facts on the table, explain them to their lawyer, and work with their lawyer to counterbalance those bad facts with ones more material to the dispute.

Next up on the year-end review, you guessed it...Top 10 Mistakes Employers Make in Competition Lawsuits.

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