Sidestep the Drama: Steps to Reduce Your Exposure to Employee Mobility Headaches
After a long search, your company has found the perfect candidate for an open position, and you can’t wait for her to get started. But a week after she settles in, her former employer’s outside counsel sends you an angry letter with a draft complaint attached, insisting your new employee violated her prior employment agreement and stole confidential information – and now both she, and you, are on the hook.
When you ask the new hire about the allegations, she is indignant – she’s not a thief, and she gave back her laptop and shut down her former work email account when she left that company. When you and she look further, though, on her personal phone she finds a photo she snapped of a whiteboard session at her prior employer, detailing a strategy for a sensitive deal with a competitor. She forgot about the photo soon after taking it and hasn’t looked at it since leaving the company. She also remembers that on her last day, she sent an email to her direct reports explaining her new position, and asking them to “keep in touch if you would like to know more.”
And then you spend weeks negotiating with the former employer, explaining what happened and trying to prove your and the new hire’s lack of malicious intent. You spend thousands of dollars on attorneys’ and experts’ fees, hoping for a best-case scenario of avoiding litigation – and dreading a worst-case one of defending lawsuits, losing a valuable new employee, and tarnishing your company’s reputation.
To say the least, that’s not how you had planned to spend your time and legal budget. Unfortunately, it’s a common scenario, particularly when employees move between competitors or leave on less than great terms. If it sounds all too familiar, consider a structured intake process to help protect your company.
The goal is two-fold: help new employees comply with their obligations to former employers, and be able to demonstrate to suspicious former employers that you have acted in good faith. When you can explain your robust and routine intake process, you may be able to take the winds of indignation out of former employers’ sails.
Here are our suggestions for your intake process. You can implement these for all candidates, or focus on high-risk groups, such as senior employees or people coming from competitors. By using a straightforward checklist and questionnaire, the process need not be time-consuming, and the avoided costs and delays can be substantial.
- Know what the employee’s contracts say. Ask each candidate explicitly whether she has any restrictions in agreements with then-current or former employers. These restrictions can appear in stock grant agreements as well as standard employee agreements. Frequently, the employee does not know what specific obligations she has, and may not even know what the operative employment agreement is. Unless the employee can provide copies of those agreements, or specific restrictions are unenforceable in your jurisdiction, expect that new hires are subject to non-competes, non-solicits, confidential information restrictions, and intellectual property assignments.
- Track what you know and what you are doing. The more people you hire away from a single company, the more likely it is that they will take a hard look to see if the departing employees are complying with their obligations, and the more likely a lawsuit will seem cost-justified – especially if you hire from competitors. Maintain a list of companies from which you frequently hire so that you can track common restrictions. For example, if you know Acme Co. usually includes a 2-year non-solicit in its employee agreements, you can be reasonably confident that any Acme employee will have that limitation, even if a given candidate doesn’t remember.
- Tell candidates they are expected to know their obligations and comply with them. If a candidate does have an enforceable restriction, tell him – orally and in writing that you expect him to honor it, just as you expect him to honor employment agreements with your own company. Be absolutely clear about this: your company will not tolerate violations of former employment agreements.Include this expectation in your written offer letter and make it a condition of employment. Then follow through.
- Remind the candidate: you are hiring them for their skills, not their prior employer’s property. Explain to every candidate that she must not take any confidential information from the former employer. You don’t need it, you don’t want it, and you require the candidate not to take or bring it.
- Be thorough and explicit; use a checklist. Go through the common pitfalls with your candidate. It is easy to overlook the many places that employer materials may reside. For example:
- Personal email accounts.
- Cloud storage accounts.
- Text messages.
- Photo files.
- Personal computer or tablet used for work.
- Saved credentials, such as in an email or cloud storage app.
- Don’t assume the candidate thinks like a lawyer. Keep in mind that many employees do not have the same sense of “proprietary” or “confidential” that their employers (or their employers’ lawyers) do, and often feel a sense of personal ownership in their work. You may need to remind them that their prior employer sees things differently. Frequent examples that can lead employees astray are tools for pricing, costs, or project management; customer lists that a sales professional considers a personal referral pipeline; inventions or innovations that the employee pursued on the side but that relate to his work in his prior job; or design work that the employee considers part of her personal portfolio.
- Gently remind the candidate, don’t be stupid. Advise the candidate to avoid conduct that will raise suspicions. The goal is to reassure, not alarm, the former employer. For example:
- Do not send or forward emails or documents, even contact lists, from work to personal email accounts.
- Do not upload or transfer work documents on thumb drives or through cloud services.
- Do not take screenshots of work documents or materials.
- Do not try to delete or “wipe” files from work computers.
- If anyone asks the departing employee where she will be working next, answer honestly. Everyone will know soon enough; lying or concealing just raises suspicions.
- Do not talk with co-employees about also leaving the former employer, if a non-solicit applies. If the candidate’s team members or other co-workers ask about prospects for them, too – and they will – the candidate should simply say, I can’t help you with that.
- Give notice. Nothing raises suspicion like resigning abruptly on a Friday night with a promise to return your laptop “next week.”
- After departure, be scrupulous in not accessing any accounts or materials from the former employer. Many companies do not cut off former employees’ credentials immediately, and it is all too easy to click on the wrong account in a phone email app – and thereby create a record of post-employment access.
- Tell the candidate to be cooperative. The candidate may wish to directly ask the former employer for instructions about what to do with the employer’s materials, such as text message history on the candidate’s personal phone. Until the former employer provides those instructions, the candidate should neither access nor delete those materials. It is in everyone’s best interest for the candidate to make clear that she is acting in good faith. And if the current employer reacts negatively or suspiciously, best to know that at the outset.
- Consider separate counsel. For very high-risk candidates – for example, a senior executive from a fierce competitor – consider hiring separate counsel to advise the candidate on her obligations. Having separate, independent counsel also allows the prospective hire to freely ask about borderline issues or correct mistakes. For example, the executive may wonder whether specific information is truly confidential, and independent counsel can answer that question without creating the same disclosure exposure. Or the executive may have inadvertently kept confidential work files on a personal computer or in a home office. Independent counsel can quarantine those materials and arrange to return them to the original employer without raising the same suspicions about disclosure or breach.
- Don’t pay for what you don’t want. Where qualified employees are very much in demand, employers often pay referral bonuses to their own employees. If your employees are subject to non-solicit restrictions from former employers, you pay referral bonuses, and the employees reach out to their old co-workers, you risk a claim for inducing the employees to breach their non-solicit agreements.
- Document what you’ve done. Have the candidate acknowledge what you have told him, what he has done, and what he will do. Use your checklist and have the candidate and the intake employee sign it.
- Have a plan B. No matter how careful you are, you cannot eliminate all of the risks. A careless employee may still bring over confidential data. An overzealous competitor may still sue the employee, and perhaps your company too, despite your safeguards. Decide – before you make the hire – under what circumstances you terminate the new hire, under what circumstances you will indemnify the new hire for legal fees or damages, what you will do if the new hire is enjoined from working, and what you are willing to litigate.
When you implement these steps in your company’s hiring process, you build two lines of defense. First, you significantly reduce the risk that new employees violate their agreements, particularly by bringing materials with them that they should not. Second, if you do receive an angry call from a former employer, you can reassure that company by describing the process to prevent violations that you followed – showing good faith and no nefarious intent. That ability can go a long way towards a calm, and quick, resolution.