Protecting Against Employee Raiding
Employee raiding is on the rise. A growing shortage of talented workers means companies are looking to raid employees, rather than recruit employees. What have you done to minimize the damage if a competitor engages in employee raiding and steals your employees? This article by attorney Jim Komie of Schuyler, Roche & Zwirner, P.C. provides excellent advice on how to mitigate the risks of employee raids.
It is one of the biggest challenges facing business owners today.
You hire an employee with little or no experience. You devote significant time and money to training him.
You introduce him to your customers and give him resources to develop new customers for your company. Slowly but surely, the employee starts to become profitable.
That's when it happens. Late Friday afternoon, your new superstar hands you a letter of resignation. He is joining your main competitor.
You soon learn that he is contacting the customers he got to know while working for you. Customers begin to follow him to the new employer, including some of your best and oldest customers.
You are a victim of employee raiding. How could you have protected yourself from this worst case scenario? What can be done to mitigate the adverse consequences of employee raiding?
What You Can Do Now to Protect Your Company
When it comes to defending against employee raiding, an ounce of prevention is worth a pound of cure. There are a variety of things you can do today to improve your business's readiness to defend its competitive position in such a situation.
- Implement Or Update Your Non-Competes. If you have not had your employees sign non-competes, you should consider doing so immediately. Even if you have had your employees sign noncompetes, you may want to have the noncompete agreement reviewed to determine its enforceability. You may learn that your agreement is outdated or that it is so broad and overreaching that a court may refuse to enforce it.
Having your employees sign new or updated non-compete agreements can have a variety of benefits. It should give your business a powerful weapon in the event an employee leaves and begins competing against you unfairly. Also, having your employees sign new or updated non-competes can have a significant deterrent effect. An employee who has just signed a non-compete may think twice about taking a customer list.
- Improve Record-Keeping. You should keep all non-compete agreements in an easily accessible place. An employee's personnel file is as good a place as any. It is also a good idea to have multiple copies of each employee's non-compete agreement and keep them in different places. In some extreme cases, employees have pulled their personnel files and destroyed the copy of their contract.
You should also do a quick review of your files to confirm that you in fact have a signed non-compete agreement from each employee. It is not uncommon for employees to slip through the cracks. For example, some employees say they want to review the agreement and then fail to return a signed copy. There is nothing worse than finding out after an employee has left that he never returned a signed copy of his non-compete agreement.
- Tighten Security. One factor that courts look at in evaluating whether to enforce a restriction on an ex-employee's use of customer information is the steps that the employer has taken to protect the confidentiality of its customer information.
You should therefore consider implementing certain measures to tighten the security of your customer information. You may want to require that customer information be kept under lock and key when not being used.
Confidential information should be labeled as such. You may want to permit employees to have access to customer information only on an "as needed" basis. Any such measures should include a device (such as a password) to restrict access to any customer information maintained on your computer system.
Article provided by attorney Jim Komie of Schuyler, Roche & Zwirner, P.C. Jim has a wide variety of experience in commercial litigation, with an emphasis on employment litigation and counseling. Jim can be reached at 312 565.8352 or via e-mail at [email protected].
Share this article
Additional Resources for Entrepreneurs