Today I want to talk about a scenario that is on the mind of a lot of business owner clients of mine. The situation or question is what happens if I have a key employee who leaves the company and goes into competition with me using all of my tools, tricks, and knowledge against me?
I’ve talked before about things that the business owner can do ahead of a problem or proactively in advance. Those things include getting a signed non-competition agreement, non-solicitation agreement, and having the employee sign a confidentiality agreement. Also, structuring your customer interaction so that the customer is interacting with your team as opposed to solely with one specific person.
In a perfect world, all those types of agreements would be in place, but we don’t live in a perfect world. So I’d like to talk about what to do if you don’t have any agreements in place. Worse yet, a key employee leaves the company and then immediately starts competing with your company.
Here is an analogy I like to use. Since this is football season, I’ll make my point using a football analogy. Inevitably during any football game, some player on the field is going to get hit or injured in a bad way. What happens when the play ends, and everyone is still on the field? Nobody touches that player, right? And you know, a lot of times the team members will kind of stand in a circle around the player. The doctor will come out; the coach will come out, maybe somebody with a stretcher.
The idea is that the whole team gets out there, talks to the player assess the situation, and then after evaluating, they act in a coordinated way. Sometimes the player is going to be ok and just needs to be helped off the field. Other times, they need a stretcher or golf cart to get off the playing field. But, but before any of that happens, there has to be an evaluation of the best course of action.
In this situation, the player that has fallen on the ground represents your business that is being threatened by your former employee, who turns out may have some disloyal tendencies. In this kind of situation, speed is an essential factor. Every day that goes by, you have fewer and fewer options. You are going to have your most possibilities in dealing with a situation right at the beginning. As time passes, options start to go away or fade in their effectiveness. So speed is your friend. Delay is your enemy.
Number two, think about who you need to be on the response team to deal with the situation. First of all, I would encourage you to talk with your business attorney. If you don’t have a business attorney, the lawyers at Sierra Business Law Group can give you a preliminary consultation for free. Regardless, you need to talk to a business attorney to find out what legal options are still available to you, even though you don’t have the optimal set of agreements.
Number three, consider your non-legal options. A lot of times, business owners can protect themselves by turning to resources outside of the law, even though it’s a somewhat legal situation. And so think about who those people are. I mean, you have great relationships with vendors; you have great relationships with your current employees and staff. You may have good relationships with customers, and so there’s going to be a way that you can use those relationships to strengthen your position in the instance when you have this disloyal former employee.
Along with that, another part of your team is possibly going to be somebody with technological expertise. If you have an IT department or you have a contractor who provides IT services, that person can help you assess the situation, investigate the extent of the damage, and suggest some technological remedies. You may have to restrict future access to those materials. So you need to rely on your team to assess.
Here are two points of caution for this type of situation. You’re not going going to go out onto that football field and start moving the player around when he may have a neck injury. You wouldn’t want to start touching stuff until you understand the situation. And so, in the instance where you have a disloyal former employee, who’s competing against you, I would not immediately start talking to them. First, speak to a business lawyer, talk with your team members, do your assessment, speak to your IT person.
Once you have a strategy and your team in place, that’s when you can start communicating with the disloyal employee. You want to be careful about talking with the employee because it can create an opportunity for the former employee to put words in your mouth. The record will show that you both spoke on a specific date, and the former employee may attribute statements to you that wasn’t made or that may have been taken out of context.
So, you have to be extremely careful because now the situation is more adversarial. You may have enjoyed many cups of hot cocoa or lunches with that employee and developed a camaraderie. But now there’s an adversarial situation, and you don’t want to expose yourself to words being put in your mouth.
Another thing that I would encourage you to avoid in a situation where you’re dealing with a disloyal former employee is not to go around badmouthing that employee because when you’re throwing mud around, some will get on you. It could take a reasonably lousy situation and make it much worse quickly.
So, be careful with communications with a former employee and also with the discussions about a former employee, especially before you’ve talked to your business attorney, IT professionals, team members, vendors, and your customers. So hopefully, that’s something that you can kind of put into your future action plan. So as in life and business, you sometimes have situations where you’re a little bit unprepared at the beginning, but now you know how to take a moment, assess and develop a strategy, and get your team together, and then follow a coordinated approach.
If you have any other questions about this kind of situation, feel free to reach out. I would invite you to come to talk to one of our business attorneys at the Sierra Crest Business Law Group.