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John B.
Farmer

 

Lawrence E. Laubscher, Jr.

 

Ian D. Titley

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Things You’ll Wish You Had Done When Your Star Employee Defects

Wednesday, May 17th, 2017

When a key employee defects to a competitor company, it’s Judgment Day for how well you have prepared for such a possibility. If you prepared well, you might be able to crush the defection. You might even prevent it from happening. But if you haven’t, there may be little you can do to protect your company.

These are things you’ll wish you had done long before the defection:

Set up your computing environment to capture important data.

Sometimes departing employees try to take important company data with them to use in the new job. They might send it out through a personal email account, or upload it to a cloud service, such as Dropbox.

You want to record electronic evidence of any such illicit activity in case you need it in a legal fight.

According to John Simek, who is a principal with the technology services firm Sensei Enterprises, your company’s computer network should be configured to log extensive server and firewall activity.

Simek also said that, for about $30 per computer, you can log all activity between that computer and any devices connected to it by a USB port.

Also think about company information leaving through personal devices (e.g. smart phones, tablets, laptops). Consider having the company supply such devices for business use only and banning use of personally supplied devices for work. If you allow use of personally provided devices for work, contractually secure the ability to search such devices.

Make certain you are contractually entitled to get the passwords for these devices. Otherwise, encryption on them might defeat an inspection.

Simek also noted that a Microsoft environment preserves more logging information than an Apple environment, which means Apple devices will leave less evidence of bad acts.

Get a non-compete.

A non-compete agreement prevents a departing employee from working for a competitor for a reasonable period of time.

Courts dislike non-competes. California will not enforce them. Other states such as Virginia flyspeck them for being broader than necessary, and invalidate them if they are.

To be legal, a non-compete must be custom tailored to the specific employee by an experienced employment lawyer. Off-the-shelf terminology probably will fail.

Non-competes are controversial because they could prevent someone from getting another job, at least a job that pays comparably. Demanding a non-compete might make it hard for you to recruit good employees.

Have employees sign a confidentiality and intellectual-property rights agreement up front.

Among the key terms, such an agreement will make all intellectual property related to the person’s employment the property of the employer. It also will impose strong confidentiality obligations. Such an agreement must be custom drafted by an attorney to suit your company’s situation.

In that agreement, you will include provisions that will discourage defections by obligating the employee to make certain disclosures and take certain actions regarding confidential information at the time of leaving.

Treat your company’s trade secrets as trade secrets.

A trade secret is any information that has value to a company because it kept it secret. Common examples are product-development plans and internal financial information.

Information constitutes a trade secret only if you take reasonable measures to keep it secret. Confidentiality agreements with employees and others are important, but you also need to impose secrecy-protection protocols, such as making sensitive information available internally on a need-to-know basis.

What to do when the defection happens.

Immediately hire an attorney to assess the situation and advise you. If you wait to see what develops, you may lose the ability to get a court to ban the defecting employee from working for your competitor or even the ability to restrict what the defecting employee can do while working for that competitor.

Preserve the computing environment of the defecting employee. Get a computer forensics firm such as Sensei to inspect the computers used by the departing employee (including portable devices) for signs of bad acts, such as stealing documents.

Don’t do this with your in-house IT staff. Have a computer forensics expert do it so such person can testify if legal action ensues.

Simek advised that, if such inspection will not occur immediately, before again using the computer workstation of the departed employee, remove the hard drive and install a new hard drive for the next user. The removed hard drive will contain a lot of useful data, which you might need if things turn out badly.

Written on May 17, 2017

by John B. Farmer

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