What To Do When A Key Employee Leaves: Seven Steps To Protect Your Business

» Posted in News & Resources

Employees resign all the time; that is the nature of employment. Regardless of how an employer feels about the departure of a key employee (sorry – or happy – to see them go), there are some key steps a business should take to adequately protect the company, especially if the former employee is going to work for a competitor.

  1. Check To See What the Employee Has Agreed To In the Event of a Departure. There may be a separate Non-Compete Agreement or other form of restrictive covenant. There may also be provisions in the company’s various policies – HR, Social Media, Code of Conduct, etc. – that describe the former employee’s obligations upon departing the company.
  2. Determine if the Agreement/Policy is Enforceable and In Good Legal Standing. Many employers have fairly broad agreements and policies that apply to employees in many different states. Not everything is enforceable everywhere and this area of the law is often hotly contested by employees and always changing. It’s a good idea to double check with HR and your legal counsel that the company is on firm footing. For example, in California, covenants not to compete between an employer and employee are essentially unenforceable. Other states will enforce all or some elements of a non-compete agreement. However, even in California, non-solicitation provisions – of both customers and other employees – may be upheld. In fact, a recent case in Federal Court for the Eastern District of California (Sacramento) did just that when it issued a preliminary order enjoining a former employee from soliciting the customers of his former employer. (Stay tuned to this space for a forthcoming Blog entry on that rare win for a California employer.)
  3. Remind the Departing Employee of His/Her Obligations – In Writing. Send the departing employee a letter that sets out what s/he agreed to, citing to the specific restrictions and obligations. It doesn’t have to be accusatory or harsh, just a polite reminder of the terms of departure.
  4. Evaluate and Possibly Limit/Cut-Off the Departing Employee’s Access to Company Information. No one likes to assume the worst when it comes to a departing employee, but it may be better to err on the side of caution. If a company does have concerns about what the departing employee might do, the company should take steps to immediately a) relieve the employee of any duties that allows this person access to the company’s confidential information; b) restrict the employee’s access to areas where confidential information is kept; c) disable passwords and email accounts; d) request that the employee return all company-owned equipment such as laptops, tablets, cell phones, PDAs – basically anything that might contain confidential business information; and e) request that the employee return all business documents received from or generated during their employment.
  5. Determine What Confidential Information the Departing Employee Knew. A company should also determine what specific confidential information or trade secrets the departing employee may have in his/her possession. For example, does the employee have access to sensitive company financial data, did the employee attend that conference where the company set out its critical future strategy, is the employee leading or participating in new company initiatives? These are the types of specific confidential information that an employer should explicitly request that the departing employee return to the company and/or confirm in writing that the employee no longer has copies.
  6. Preserve Electronic Evidence. Departing employees have been known to misappropriate a company’s trade secrets or confidential information, especially right before they leave. If the departing employee engaged in any shenanigans, it is almost always with electronic information. Therefore, it is absolutely critical that a company preserve all evidence of the employee’s pre-resignation activities. That means do not immediately wipe clean and redistribute a key departing employee’s laptop, smart phone and/or tablet. Instead, disconnect all such devices from the network and set them aside. Don’t let just anyone log in to the devices as they may inadvertently compromise electronic evidence. It is best to let the professional computer forensic experts analyze the device and properly extract the data and information so that it is properly preserved.
  7. Contact Key Customers Regarding the Employee’s Departure. It is always a good idea for the company to reach out to the key customers with whom the departing employee interacted. Just advising the customer of the employee’s departure and letting them know who from the company will now be handling their account can go a long way to preserving good customer relationships.