Legal Issues When Leaving a Job
Employee mobility is becoming more and more common. While changing jobs is exciting, you need to be cautious when making a move to avoid legal liability. If you’re changing jobs, you may want to talk to an attorney to get advice on your specific situation. However, here are a few general points to keep in mind.
Review Post-Employment Restrictions Before Leaving
It’s easy to forget about post-employment restrictions you may have signed on the first day of work with your former employer. Nevertheless, you likely signed agreements that you will need to review to avoid violating duties which carry forward even after you change employers. Post-employment restrictions can include non-competition and non-solicitation provisions, and can often be found in employment contracts, stock option agreements, deferred compensation agreements, bonus plans, and purchase/sale agreements. Often overlooked, post-employment restrictions are one of the easiest ways employers can file lawsuits against former employees.
Generally, post-employment restrictions must not go beyond what is reasonably necessary to protect a legitimate business interest. This means the restriction must be limited to a geographical location and to specific types of jobs or industries. For example, a company that only operates in Texas will most likely not be able to enforce a non-compete provision against an employee moving to a company which only operates in Florida. Likewise, a company most likely cannot stop an employee working in sales from taking a job in human resources with a competing company.
If it’s clear you signed enforceable post-employment restrictions, you still have options. First, you may be able to structure your new position so that its duties and responsibilities do not violate your restrictions. For example, you may arrange your new job such that you avoid dealing with certain clients or performing particular duties for the duration of your restrictions. Next, see if your new employer will place you “on the bench.” Your new employer may be willing to place you in a temporary position for the duration of your restrictions, which may protect both you and the employer from a greater risk of liability. Lastly, depending upon the circumstances of your departure, your former employer might be willing to waive your post-employment restrictions.
Questions on your post-employment restrictions should be reviewed by an attorney admitted to practice in the applicable state, as the enforceability of post-employment restrictions varies depending on the state and differs from situation to situation.
Preparing to Leave
Even if you are not subject to post-contractual agreements, you may still be liable to your former employer for certain conduct as you take steps to leave. Notably, while you’re working for an employer (even after you’ve given your notice) you owe a fiduciary duty to that employer, which means you owe a legal duty to your employer to act in their best interest before you change jobs. This includes not soliciting clients or business away from them, and continuing to work to the best of your ability to benefit their business. If you are found to have taken a business opportunity away from your former employer while you are still employed by them, you (and possibly your new employer) could be financially liable for that lost opportunity.
It’s best practice to be cautious when informing other employees, clients, customers, vendors, or business partners that you’re changing jobs. Simply let them know you’re leaving, and avoid giving them a lengthy reason why or encouraging them to join you. This can be difficult because you will most likely have built up a business or personal relationship with them. However, you will be able to contact them (absent any post-contractual agreement) once you start with your new employer and can explain the situation.
Additionally, it’s important to be cautious of what materials you retain and carry over to your new employer. You must be certain to return all company-owned materials to your employer, including your computer, phone, notes, drafts or final documents, or anything that may contain confidential or proprietary information. Simply because you worked on a project or task does not mean you’re allowed to save or keep information related to it. Anything you prepared for your former employer is a work product of your former employer and must not be improperly retained. This includes reports, standard forms, coding, client lists, blueprints, or anything that you created that was related to your job. An employee retaining confidential or proprietary information is often the spark that ignites a lawsuit.
Starting Your New Job
Even when you start your new job you may not be out of the woods yet. You may have also signed a non-disclosure agreement (“NDA”). NDA’s prevent you from disclosing confidential or proprietary information, and may have additional restrictions included in them related to trade secrets. Trade secrets are information which provides an economic or competitive advantage to its owner because the information is not generally known to the public or within an industry. Examples of trade secrets include, but are not limited to, marketing plans, commercial drawings, recipes, client list, or manufacturing processes. Employees who take trade secrets to a new job can be liable under the Defend Trade Secrets Act (“DTSA”), and a court may order them to stop working for a new employer and pay any damages, such as lost profits, caused by using those trade secrets.
The best way to avoid a DTSA claim or an allegation of violating your NDA is to refrain from using practices or procedures gained from your former employer. Stick to commonly known practices in your industry. It can be difficult to perform your new job and separate out the methods or practices you learned from your former employer, but a helpful tool is to avoid the “we did it this way at my old company” mentality. Rely on the skills and knowledge you’ve gained through your education and industry experience rather than confidential or proprietary information from your previous job. Additionally, if you are working for a direct competitor, do not use inside information about your former employer to undercut them. For example, if your previous employer is about to release a new product and marketing campaign, do not disclose that to your new employer. If your new employer ever asks about your previous employer, it is best practice to avoid specific statements about internal methods and procedures.
It can be easy to be get swept up in the allure of a new job, but it’s important to remember your legal obligations. To the extent you have questions or concerns, contact an attorney to help you review what you signed. This way you can focus on your new job – and not spend those first days worrying about facing a lawsuit.