Key Considerations for Employers

Key Considerations for Employers Dealing with Possible or Actual Defections of Employees to a Competitor

The stage at which an employer may find it necessary to hire an experienced employee competition lawyer will vary. Some employers may only seek legal advice upon receiving employees’ resignations. Others, perhaps having experienced the impact of employee competition previously, seek advice from their lawyers to reduce the risk of harm from future defections.

The lawyers at Pulver Crawford Munroe LLP have deep experience in advising employers in these situations. We routinely provide strategic advice on how to reduce risk arising from future defections and also to protect companies’ business interests after employees have left for a competitor. We are available for consultations on these matters.

Before the Departure of Employees

Ideally, to protect your business from the potential harm of employees defecting in the future to a competitor, you will hire an experienced employee competition lawyer to advise you at an early stage. Your lawyer can provide advice on several critical matters, including:

  • The use of non-compete or non-solicit clauses in your employment agreements. Importantly, your lawyer can advise on how to draft the clauses to improve the prospect of enforceability with the courts. This is a specialized area and definitely not an instance where boilerplate language from other contracts should be copied.
  • Requiring reasonable notice periods so you have an opportunity to replace departed employees before they leave.
  • The use of economic disincentives to dissuade an employee from going to a competitor, such as forfeiture of share options or retention bonuses.
  • Measures that should be taken to increase the likelihood of the courts considering company documents, such as client contact information, as being confidential.
  • Measures you can implement to detect potential employee departures before they happen.

After the Employees Leave for the Competitor

The departure of employees to your competitor often will come as a complete surprise. To reduce the harm from potentially unlawful activity, it is critical to obtain strategic and legal advice from an experienced employee competition lawyer immediately. Your lawyer should be able to advise you on the following issues, amongst others:

  • Can you enforce any non-solicit or non-compete clauses in the former employee’s employment agreements?
  • What are the prospects of obtaining an injunction immediately from the courts to prevent what appears to be unlawful competition?
  • Are the employees fiduciaries, e.g. senior executives or key employees, and hence prohibited for soliciting customers and clients for a reasonable period of time?
  • Does it appear that confidential information, e.g. client lists or sales histories, were taken? Should a computer forensics firm be retained to determine what documents may have been downloaded or emailed?
  • Can an injunction be obtained compelling return of confidential information?
  • How should you frame the letter to the employees and their new employer to minimize or eliminate unlawful competition?
  • Should a lawsuit seeking damages for unlawful competition be commenced?
  • What can you tell customers and clients about the departure of the employees?

If you find yourself needing advice in any of these areas, contact the lawyers at Pulver Crawford Munroe LLP.