A few days ago, I wrote about the top ten things a company should do when an employee resigns to join a competitor (click here to see that post). But what about the flip side of that coin?  What mistakes should be avoided by departing employees and the firms that hire them?  Here are ten things to keep in mind:

1. Avoid Taking Business Records
Taking business records and information may be a bad idea for many reasons. It may be a violation of a confidentiality or nondisclosure agreement, and depending upon the content of the records, it may also constitute misappropriation of trade secrets. It may also give rise to a claim for conversion of property. In addition to these possible legal reasons, taking  business records angers employers and augments their suspicions. When a company learns that a former employee has e-mailed information to a home e-mail account, or, that a previously full file cabinet is now empty, a number of questions arise. Why did the employee take it? What else did the employee take? What does the employee plan to do with it? Upon asking these questions, employers may begin to “re-think” a previous decision to permit the employee to accept a new job free from litigation. The employee may no longer seem trustworthy, and the company may feel it can no longer rely on assurances that the employee’s new job poses little or no competitive threat.

2. Sabotaging Records
Refraining from taking records is a good start, but respecting the integrity of records is a good follow-up.  Some employees mistakenly feel they can secure an undetectable advantage by altering company records on their way out the door. For example, departing employees can be tempted to alter a telephone number in a computer system by one digit simply to gain a head start by slowing down the company’s ability to contact clients, or to delete key information, assuming that no one will ever find out. In this time of technological advancements, however, employers are gaining more and more investigative resources that enable them to discover such misconduct, and computer sabotage easily begets claims for a violation of the Computer Fraud & Abuse Act. Departing employees should be reminded that the “gain,” if any, secured by sabotaging records is far outweighed by the “pain” that may follow when their misconduct is uncovered.

3. Soliciting or Telling Clients Prior To Resignation or Departure
Even if an employee lacks a non-solicitation agreement, it is wise to remind departing employees not to begin soliciting clients until after their departure. Soliciting clients or advising them of the employee’s plans prior to resigning can lead to problems. Although the law varies among states as to the propriety of an employee giving clients advance notice of his/her departure, solicitation prior to the employee’s departure generally is not permitted. Pre-resignation solicitation may give rise to claims for breach of duty of loyalty and may serve as an aggravating factor for a judge who later considers the equities when contemplating injunctive relief. Departing employees often feel that if they do not advise clients of their impending departure, the clients will hold it against them. Although this is possible, employees should be reminded of the possibility of being enjoined from doing business with clients who were improperly solicited prior to resignation.  Moreover, solicitation of clients prior to resignation may result in the employer finding out about the impending resignation from the client, and not from the employee, resulting in a heightened mistrust of the employee. The safest route is for an employee to continue to serve the interests of the employer until the very last moment of employment.

4. Soliciting/Telling Fellow Employees Prior To Resignation or Departure
Similar to solicitation of clients prior to resignation or departure, solicitation of fellow employees may also be a bad idea. Departing employees often misjudge whether they can trust their colleagues to keep their impending resignation a secret.  Moreover, even if their colleagues do keep the secret, they frequently become witnesses after the employee’s departure as the former employer will turn to its remaining employees when it conducts its investigation. Employers resent being the last to know about an employee’s departure for a competitor, and they may scrutinize the former employee’s actions with greater vigor if they believe the employee was trying to encourage others to join in the move to a new company.

5. Failing To Segregate Non-Public vs. Public Data
Departing employees sometimes take information for innocent reasons, unintentionally creating the appearance of an intentional misappropriation of trade secrets or conversion of property. A common example includes employees taking contact data that contains not only personal contact information, but also professional contact information. Other employees remove sales records with the intent of retaining information to enable them to substantiate their entitlement to commissions after they depart. Another common example includes employees taking articles or studies they wrote simply because the employees feel proud of their work product, not realizing that the employer views the work product as belonging to the company. It is wise to remind a departing employee that the removal of “personal” information and property should be carefully analyzed to ensure that unwanted and allegedly proprietary or non-public information is not inadvertently taken.

6. Granting An “Exit Interview”
In some instances, it may be advisable for an employee to resign without giving prior notice. Negotiations concerning the parameters of the employee’s subsequent employment with a competitor may well be more successful if conducted by counsel after the employee has resigned. The simple truth is that no matter how well you coach employees about how to resign, they rarely appreciate the legal consequences of their words. Moreover, savvy employers may use an exit interview effectively to create evidence that later shows up in support of a motion for a temporary restraining order. If delicate legal issues surround the departure of an employee from one competitor to another, the discussion with a former employer may well be left to counsel, and the employee should be advised to avoid granting an exit interview.

7. After-Hours Access
Employees planning to leave for a competitor often access their offices or computers during odd hours with the intention of preparing for their departure when no one is around.  After-hours access can be detected by security systems, or in some cases, it can be recorded by computer systems. If such access deviates from an employee’s normal course of conduct, it may tip off the employer of the impending resignation. Even if such access is not detected until after the employee’s resignation, it creates the appearance of impropriety. If coupled with other common mistakes discussed in this article (e.g., after-hours removal of business records), the appearance of impropriety grows stronger.

8. Badmouthing The Firm
Any time an employee leaves to join a competing firm, there is likely to be some hard feelings. Nothing compounds these hard feelings like an employee who badmouths the former employer on the way out the door or even after departure. Departing employees should be reminded that badmouthing the former employer to fellow employees accomplishes little -- other than providing motivation for the former employer to make the transition difficult. Moreover, badmouthing the former employer to customers can have the additional effect of backfiring, resulting in the loss of otherwise attainable business and perhaps leading to defamation claims. Employees should be advised to take the high road.

9. Failing to Work Until The Last Minute
Understandably, it is hard for a departing employee to be motivated when a new job is on the horizon. In some instances, after providing notice of resignation, employers may limit the departing employee’s access to information and customers. But a decrease in productivity in the weeks or months leading up to a resignation or departure may tip the employer off about the impending resignation, and worse yet, it may create the appearance that the departing employee was holding off on completing work with the intent to divert such work to their new employer.

10. Failing To Consult With Attorney Prior To Resignation
Many hiring managers make the mistake of waiting until after an employee has been hired to get counsel involved, by which time the departing employee may have made many of the mistakes outlined in this post. Counsel should be included early in the hiring process so that departing employees obtain the advice they need. If there are attorney-client privilege concerns, the employee should be advised to consult with an attorney of his/her choosing. No matter what, transitioning employees from one competitor to another is a process filled with tension. Foolish mistakes can increase that tension and may lead to litigation or strengthen a party’s desire to litigate. Careful planning and early advice can minimize this risk.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

You are the Assistant General Counsel for Employment with a national company and just learned that the Branch Manager and the entire sales team from your Kansas City branch office have jumped ship and joined your largest competitor.  The Branch Manager attended all of your strategic planning meetings in late 2009, which led to the roll-out of your company’s 2010 marketing plan.  The sales reps control four of the company’s ten biggest accounts, and already you have heard that they are calling your customers.  Your Regional Vice President’s first reaction:  "let’s go after them."  But HR reminds you that all these employees were from the company that you acquired a few years back – the one that didn’t have any of its employees sign non-competes.  So now you are asked, “what can we do when we don’t have a contract?” 

Well … you are not necessarily out of luck.  Here are some of the key claims to consider:

Misappropriation of trade secrets.  For sales employees, the key question is whether your customer list can qualify as a trade secret.  It may qualify if it is a “retail” list of individuals.  Their names may be in the phone book, but of course the phone book doesn't have any cross reference that identifies names might be your customers.  But if your customer base is “institutional” -- well-known companies that obviously would need your product, such as if you sell windshield glass auto manufacturers – your list is easy to figure out and probably isn’t secret enough to qualify.  Compare, for example, Merrill Lynch v. Zimmerman, 1996 WL 707107 (D. Kan. 1996) (retail stockbrokerage customer list is a trade secret) with Reed, Roberts Assocs. v. Strauman, 353 N.E.2d 590 (N.Y. 1976) (customer list not a trade secret; plaintiff’s consulting business advised companies on unemployment compensation and workers compensation issues).  Even if your customer list is not a secret by itself, additional data about customers, such as sales history, preferences, and the like, may qualify, if you can prove it meets the common law or statutory standards.  See, e.g., Zoecon Corp. v. American Stockman Tag Co., 713 F.2d 1174 (5^th Cir. 1983) (in this case, trade secret customer information included “type and color” of items purchased, “date of purchase,” “amount purchased,” as well as names and addresses of otherwise obvious purchasers of livestock ear tags).

The Branch Manager has knowledge of marketing and business information.  You may be able to argue that the information he learned during your strategic planning qualifies as a trade secret.  See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7^th Cir. 1995).  The question is whether it has been kept secret, or is it now obvious because you rolled out the plan?

What kind of relief can you get on a trade secrets claim?  Listed from easiest to obtain, to hardest, you may be able to get:  (1) non-disclosure – an order prohibiting the employees from disclosing information; (2) return of information – requiring them to return it; (3) non-use -- an order prohibiting the competitive use of the information; (4) non-solicit – prohibiting them from soliciting trade secret customers; and (5) non-compete – prohibiting them from working for your competitor.  The non-compete order relies on a theory of "inevitable disclosure" of the trade secrets.  Such relief is hard to get, and in some states is completely unavailable.  Where available, it usually requires evidence that the employee cannot be trusted, and that lesser relief is inadequate. 

Breach of duty of loyalty:  This focuses on pre-resignation conduct.  Before they resigned, did they:  (a) solicit customers; (b) recruit employees; or (c) divert business opportunities?  Soliciting customers and putting a business opportunity in the “back pocket” to pursue at their new place are both out of bounds.  Some discussions with employees may be okay, but in certain jurisdictions managers may not solicit underlings to follow them to their new company.  This sometimes boils down to a question of whether communication about the new jobs constituted "solicitation" or something less. 

Unfair competition / raiding:  Unfair competition or “raiding” tends to be an “I know it when I see it” type of claim.  This vagueness is both an asset and impediment.  The claim is elastic enough to use it in unusual situations, but its vagueness also makes it difficult to assess its chances of success.  In most instances, you'll have to prove “malice”:  an intent by the hiring firm to harm your business, rather than just an intent to help their own business by adding talent. 

Computer Fraud & Abuse Act, 18 U.S.C. § 1030:  Under the CFAA, you must prove (a) the employees either fraudulently or "intentionally" accessed your computers; (b) they did so without authorization or exceeding the scope of their authorized access; and (c) that they caused damage.  Did they go into your computer and take information, such as customer lists or business data?  If so, you may have a claim, although the decisions are far from unanimous in applying the CFAA to departing employee cases (including differing interpretations of what constitutes "damage").  Advantages of a CFAA claim:  (a) no need to prove the information was secret; and (b) no need to prove “malice.”  See, e.g., Shurgard Storage Centers, Inc. v. Safeguard Self-Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000).  But see Condux Int'l Inc. v. Hangum, 2008 US Dist. LEXIS 100949 (D. Minn 2008).  There also are special provisions in the Act that apply in a medical or financial business context.  For further discussion, see Heather Steele's blog entry: "Establishing the 'Without Authorization' Element under the Computer Fraud & Abuse Act".  

Civil conspiracy:  This is an option for multiple employee departures.  Generally, co-conspirators may be held liable for all violations of each conspirator, but there must be an underlying and independelty actionable improper act by one of the conspirators.  This works well with tort claims such as trade secrets or duty of loyalty, and may apply with statutory claims such as the CFAA.  In certain states, it may even work where some employees have contracts and others don’t – you may be able to bind them all to the contracts if they all are conspiring to violate.  See, e.g., Catercorp, Inc. v. Catering Concepts, Inc., 431 S.E.2d 277, 282 (Va. 1993).  Other states don't recognize claims for conspiracy to breach a contract.     

So, there may be some things you can do, even without a contract.  To enhance your position, consider taking these steps now:

• Get contracts:  sign employees up if you acquire a company that did not use them.  Consider whether you should roll out contracts if your company is not using them yet. 
• Protect your information:  to help establish trade secret status you can use non-disclosure agreements; build computer system firewalls; remind employees of confidentiality (in manuals, log-in screens, memos, bulletin board postings); and limit access to files, lead lists, and other sensitive data. 
• Monitor computer activity:  make sure you can determine -- quickly -- if someone accessed or removed information via computer prior to their departure.