What To Do When A Key Employee Walks Out The Door

You have just been told that one of your key employees is resigning to go to work for a competitor.  You will be facing competition from him or her in the near future.  In order to protect your company’s interests and prepare yourself for that competition employers should take the following steps:

  • If an employment contract exists which contains a non-compete provision, a non-solicitation of customers provision and/or other restrictive covenants get with legal counsel as soon as possible (You should have key employees sign contracts which have enforceable restrictive covenants).  The first step may be to send a cease and desist letter or to file a lawsuit seeking injunctive relief, depending on all the facts and circumstances.  But that determination needs to be made as quickly as possible so that damage to the company can be minimized and certain legal rights of the company are not waived or prejudiced by failing to act quickly.
  • Conduct an exhaustive search to determine if the employee took anything that belongs to the company.  This would include a forensic search of the computer and smart phone and a search of relevant paper files.  Remember, even if the employee does not have a non-compete agreement if he or she takes certain company information the employer may have a claim for breach of a confidentiality agreement, breach of fiduciary duty, a violation of the state’s trade secret law and conversion of property.  If information was taken from a computer there also may be claims under certain federal laws.
  • Contact customers to notify them of the employee’s departure and tell them who will be the new point of contact.  This contact serves two purposes.  First, it will show the customer you care and hopefully allow you to maintain the relationship.  Second, in the course of this call you might learn whether the former employee has contacted the customer.  If you have a non-solicit in place the employee’s contact with the customer might violate that agreement and give rise to other claims, depending on the information that was shared and discussed.
  • Meet with your management team to discuss the employee’s departure and set out a plan of action.  In addition to setting a plan this meeting may also provide you with valuable information regarding the former employee’s plans and whether he or she has contacted any of your other employees.  Contact with other employees could violate an anti-raiding provision in the employee’s contract and, in some circumstances, could give rise to a claim for tortious interference with contract or business relations.
  • Obtain a resignation letter.  The resignation letter will generally defeat any unemployment claim that the employee may pursue if things don’t go well in his or her new job.  Furthermore, if the employee is dishonest in the letter about the reason for his or her departure (e.g. the letter states the resignation is to spend more time with the family when the reality is the person is going to work for a competitor) the letter can be very damaging to the employee in future litigation.

In today’s society you will likely lose a key employee to a competitor.  Taking these steps and potentially others, will help you protect your company’s interests and minimize the harm to the business.

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