Protecting a Company's 'Crown Jewels' Through Employee Departure Plans

Why should an employer adopt a plan to address employee departures? First, an employee departure plan will assist the employer's legal efforts to protect its proprietary business information. State law will protect proprietary business information only if the employer demonstrates that the employer itself undertakes efforts to preserve the secrecy of such information. During an employee's tenure with the company, these efforts include requiring the employee to sign a confidentiality agreement, stamping business documents as “confidential,” and password protecting access to company computer systems. The law requires that an employer maintain its diligence even when an employee departs in order to ensure that a departing employee does not walk out with or otherwise gain access to the employer's proprietary information.

A departure plan is important in protecting and preserving an employee's business goodwill. Over the course of time, an employee who calls on particular customers becomes the face of the employer in the eyes of those customers. When the employee departs, it is critical that the employer implement a process to protect the employer's investment in its relationship with the customer.

Having a departure plan sends a strong message to remaining employees that the company will act to protect its proprietary information and investment in customer goodwill. Such a message may discourage other employees from following the departing employee or from leaving altogether. It may also enhance employee morale by demonstrating to those who remain that the company will aggressively protect those tools — including proprietary information and goodwill — that make their jobs easier and more productive.

Necessary Steps

Since the benefits of implementing an employee departure plan are clear, what steps should you advise your employer client to follow when an employee leaves to go to work for a competitor? The following steps are definitely in order:

• First, review any agreements between the former employee and the company to determine the company's rights and the employee's post-termination obligations and restrictions.
• In connection with reviewing these agreements, write a letter to the employee, reminding him or her of the duty to protect confidential information upon departure, as well as any restrictions imposed on the former employee's ability to work for a competitor and/or to solicit current employees from joining the former employee in his or her new endeavor. Consider writing to former employee's new employer to put it on notice of the restrictions and obligations found in the departing employee's agreements.
• Immediately cut off the former employee's access to confidential information, including information maintained on the company's computer system. In connection with restricting access, the employer should revoke the former employee's password(s), recover keys and other entry cards, and remove the former employee from security lists of persons to be given access to the employer's premises.
• Conduct an exit interview with the departing employee. The employee should be asked where he or she kept and maintained records used by him or her in connection with services to the company. Attention should be given to locations other than the office, including the employee's car and home. The employer should also inquire about where the employee intends to work next, and in what capacity. Upon obtaining this information, the employer should determine the nature of the new employer's business and evaluate whether the former employee represents a threat of violating company competitive policy.
• Conduct a physical inventory of materials — files, papers, binders, and product inventory — located in the employee's office at the time of departure. This process will assist the employer in determining whether (and later demonstrating that) certain materials are missing.
• Immediately recover all credit and calling cards, desktop and laptop computers, printers, monitors, cellular telephones, pagers, and palm pilots, blackberries, or other handheld personal communication devices. Seek the return of written or electronic material acquired or developed by the employee in connection with his or her association with the company and that remain in his or her possession (in his/her car, home, or on his/her personal computer) at the time of his or her departure.
• Undertake efforts to preserve the departed employee's telephone and credit card records, as well as the employee's written calendars or day-timers. This process may involve communications with third parties like telephone and credit card companies.

Perhaps most importantly, efforts must should be undertaken to preserve information on the employee's computer, as well as on palm pilots, blackberries, other personal communication devices, including all computer files and hard drives. While aggressive action is appropriate, the employer should first check applicable privacy laws to determine if there are any restrictions on reviewing the former employee's computer files. The employer should make sure that the company owns or otherwise has the right to review material on the computer.

Where legally permissible, the files should be analyzed to determine the level of deletions and to locate any e-mails sent to the former employee's home, e-mails sent to or received from the new employer, e-mails or other written communication with customers or others concerning the employee's departure. Under some circumstances, it may be appropriate to make a copy of the former employee's computer hard drive.

Secondary Steps

• Consider interviewing co-workers about communications they had with the departing employee while he or she still worked for the company, as well as after he or she departed, concerning the employee's post-employment plans. Specifically, inquiry should be made about what the employee said about the reasons for his departure or about his new employer, and whether the employee attempted to recruit any remaining employees to his new venture.
• Address the remaining employees about the former employee's departure. These communications should be aimed at dealing with potential morale issues arising from the departure, as well as encouraging future reports of the departing employee's attempts to solicit the company's other employees.

Finally, it is critically important too that the employer design a strategy for communicating with customers regarding the employee's departure. The employer should quickly identify the contact points between it and those customers with whom the departed employee dealt. The employer should articulate a message concerning the departure that will encourage customers to remain with the company and that likewise avoids disparaging or defaming the departed employee or his new employer.

If possible, the employer should consider establishing a plan to obtain information from customers regarding any pre-departure communications between the departing employee and the customers concerning his or her plans to leave. This plan should also be designed to obtain any post-departure communications that may violate a restrictive covenant or indicate a violation of departing employee's other legal obligations.

In determining the amount of effort expended upon an employee's departure, the employer should review any potential corporate opportunities that may have been communicated to the departing employee during his or her employment to ascertain whether any have been pirated. This process includes analyzing whether any requests for proposal or other corporate opportunities were due or likely during the period before departure. It might also include checking telecopy records for suspicious communications.

Conclusion

At the end of the day, a well-organized employee departure plan is only as good as the effort undertaken to follow it. While the plan cannot guarantee that the former employee will not compete unfairly or usurp confidential information for his or her new employer's benefit, an aggressively followed plan will go a long way toward minimizing the damage that a departing employee can do to the former employer's goodwill and other business interests.

Employees leave their current employers every day, presumably to pursue new and brighter career opportunities. This is especially true today, as the economy seems to be picking up pace and employers find themselves needing to expand their workforces. Inevitably, some employees will go to work for competitors of their former employers. While employees have the right to seek new and better jobs, the law is equally clear that they may not do so at the expense of their former employer's business interests.

In order to preserve these business interests, or “crown jewels,” which include business goodwill and proprietary business information, a former employer should adopt and rigorously follow an organized and well-thought plan aimed at minimizing the damage that a departing employee can cause at the time of or after his departure to a competitor.

Creating a Departure Plan

Why should an employer adopt a plan to address employee departures? First, an employee departure plan will assist the employer's legal efforts to protect its proprietary business information. State law will protect proprietary business information only if the employer demonstrates that the employer itself undertakes efforts to preserve the secrecy of such information. During an employee's tenure with the company, these efforts include requiring the employee to sign a confidentiality agreement, stamping business documents as “confidential,” and password protecting access to company computer systems. The law requires that an employer maintain its diligence even when an employee departs in order to ensure that a departing employee does not walk out with or otherwise gain access to the employer's proprietary information.

A departure plan is important in protecting and preserving an employee's business goodwill. Over the course of time, an employee who calls on particular customers becomes the face of the employer in the eyes of those customers. When the employee departs, it is critical that the employer implement a process to protect the employer's investment in its relationship with the customer.

Having a departure plan sends a strong message to remaining employees that the company will act to protect its proprietary information and investment in customer goodwill. Such a message may discourage other employees from following the departing employee or from leaving altogether. It may also enhance employee morale by demonstrating to those who remain that the company will aggressively protect those tools — including proprietary information and goodwill — that make their jobs easier and more productive.

Necessary Steps

Since the benefits of implementing an employee departure plan are clear, what steps should you advise your employer client to follow when an employee leaves to go to work for a competitor? The following steps are definitely in order:

• First, review any agreements between the former employee and the company to determine the company's rights and the employee's post-termination obligations and restrictions.
• In connection with reviewing these agreements, write a letter to the employee, reminding him or her of the duty to protect confidential information upon departure, as well as any restrictions imposed on the former employee's ability to work for a competitor and/or to solicit current employees from joining the former employee in his or her new endeavor. Consider writing to former employee's new employer to put it on notice of the restrictions and obligations found in the departing employee's agreements.
• Immediately cut off the former employee's access to confidential information, including information maintained on the company's computer system. In connection with restricting access, the employer should revoke the former employee's password(s), recover keys and other entry cards, and remove the former employee from security lists of persons to be given access to the employer's premises.
• Conduct an exit interview with the departing employee. The employee should be asked where he or she kept and maintained records used by him or her in connection with services to the company. Attention should be given to locations other than the office, including the employee's car and home. The employer should also inquire about where the employee intends to work next, and in what capacity. Upon obtaining this information, the employer should determine the nature of the new employer's business and evaluate whether the former employee represents a threat of violating company competitive policy.
• Conduct a physical inventory of materials — files, papers, binders, and product inventory — located in the employee's office at the time of departure. This process will assist the employer in determining whether (and later demonstrating that) certain materials are missing.
• Immediately recover all credit and calling cards, desktop and laptop computers, printers, monitors, cellular telephones, pagers, and palm pilots, blackberries, or other handheld personal communication devices. Seek the return of written or electronic material acquired or developed by the employee in connection with his or her association with the company and that remain in his or her possession (in his/her car, home, or on his/her personal computer) at the time of his or her departure.
• Undertake efforts to preserve the departed employee's telephone and credit card records, as well as the employee's written calendars or day-timers. This process may involve communications with third parties like telephone and credit card companies.

Perhaps most importantly, efforts must should be undertaken to preserve information on the employee's computer, as well as on palm pilots, blackberries, other personal communication devices, including all computer files and hard drives. While aggressive action is appropriate, the employer should first check applicable privacy laws to determine if there are any restrictions on reviewing the former employee's computer files. The employer should make sure that the company owns or otherwise has the right to review material on the computer.

Where legally permissible, the files should be analyzed to determine the level of deletions and to locate any e-mails sent to the former employee's home, e-mails sent to or received from the new employer, e-mails or other written communication with customers or others concerning the employee's departure. Under some circumstances, it may be appropriate to make a copy of the former employee's computer hard drive.

Secondary Steps

• Consider interviewing co-workers about communications they had with the departing employee while he or she still worked for the company, as well as after he or she departed, concerning the employee's post-employment plans. Specifically, inquiry should be made about what the employee said about the reasons for his departure or about his new employer, and whether the employee attempted to recruit any remaining employees to his new venture.
• Address the remaining employees about the former employee's departure. These communications should be aimed at dealing with potential morale issues arising from the departure, as well as encouraging future reports of the departing employee's attempts to solicit the company's other employees.

Finally, it is critically important too that the employer design a strategy for communicating with customers regarding the employee's departure. The employer should quickly identify the contact points between it and those customers with whom the departed employee dealt. The employer should articulate a message concerning the departure that will encourage customers to remain with the company and that likewise avoids disparaging or defaming the departed employee or his new employer.

If possible, the employer should consider establishing a plan to obtain information from customers regarding any pre-departure communications between the departing employee and the customers concerning his or her plans to leave. This plan should also be designed to obtain any post-departure communications that may violate a restrictive covenant or indicate a violation of departing employee's other legal obligations.

In determining the amount of effort expended upon an employee's departure, the employer should review any potential corporate opportunities that may have been communicated to the departing employee during his or her employment to ascertain whether any have been pirated. This process includes analyzing whether any requests for proposal or other corporate opportunities were due or likely during the period before departure. It might also include checking telecopy records for suspicious communications.

Conclusion

At the end of the day, a well-organized employee departure plan is only as good as the effort undertaken to follow it. While the plan cannot guarantee that the former employee will not compete unfairly or usurp confidential information for his or her new employer's benefit, an aggressively followed plan will go a long way toward minimizing the damage that a departing employee can do to the former employer's goodwill and other business interests.