How to keep laid-off workers honest
Experts reveal the best ways to keep company information in the building when the employees exit.
Tom Goll, Owner, U.S. Diversified Tech, Nashua, N.H.
We always hear about what employees should do to prepare for layoffs. But what should employers do to ensure that company data, contacts and customer lists don't walk out the door with terminated employees?
By Adriana Gardella, Fortune Small Business senior editor
You can take several steps to prevent or deter misappropriation and to bolster your legal position should you find yourself embroiled in litigation, says labor and employment lawyer Chris Arbery of Hunton & Williams in Atlanta. Arbery advises employers to implement a clear policy on confidential information, specifying that all business data, media, equipment and networks are company property. Let your employees know that any unauthorized use or disclosure of company information will be taken seriously. And be sure they sign confidentiality agreements to safeguard your trade secrets and other potentially sensitive data such as customer lists.
You may also wish to consider incorporating a noncompete agreement into your employees' severance packages, says Elizabeth Milito, a lawyer with the National Federation of Independent Business in Washington, D.C. Such an agreement, which must comply with state law and be reasonable in geography and scope, will prevent your former employees from working for your competitors or striking out on their own.
Because these measures may not dissuade the most determined sneak, Arbery also counsels, "Work with a network-systems specialist to secure electronic files to prevent – or at least trace – unauthorized downloads to flash drives and the like."
This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.
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From Tom, Milwaukee WI Regarding Zwiestow's comment…you are confusing a "Non-Compete" with a "Non-Disclosure". A standard non-compete contract tries to restrict an employee or former employee from working in any capacity for another company within the same industry. Non-disclosures protect the property and processes of a business.
From Zwiestow, Holly Springs, NC oh please. I've not heard a whinier bunch of people in a long while. A non-compete is standard practice in most if not all high-tech/biotech businesses. So the company is supposed to pay you to do work for it and then wave happily as you take all your work (which you were compensated to do, remmeber) and walk out the door with it? As a business owner I have every right to ask former employees to respect the intellectual property rights that were generated before or during their employment (they were paid for all work, remember)?
I'm sure that if any of you started your own company that you'd be more than happy if your key employees quit and started a new, competitive company with all the information you generated. Please.
And Amanda, you are correct. There should be no bailouts. Companies (including GM) should fail and go out of business if they cannot compete on a regular, non-subsidized playing field. This means all those employees lose their jobs anyway, but maybe someone in a failed company will think of a better way to do business, start a company, hire you, then ask you to (appropriately) sign a non-compete.
From Tom, Milwaukee WI Non-competes are virtually un-enforceable…particularly if the employment is terminated by the employer (which is the scenario referenced in the original question). Do NOT rely on non-competes. Instead make sure you fully document all intellectual property, vital business data and processes. Protect it with trademarks, patents, copyrights, any measure you can. All employees should be submitting to Non-Disclosure Agreements, confidentiality agreements and should be made thoroughly aware that all work performed under the employment of the company belongs to the company outright.
Those items hold up in court and can/will result in monetary compensation.
From c.wise just to comment on the discussion in general, if i were a customer of one of these firms, and had placed my trust and my companies future in anindividual,only to find out they had been laid off, i would no longer be a customer. i would stick with the person i trusted.
From SalesPro Smart employees gather data while they are happily employed. Any sales person that I know usually has all the customer lists that they need long before they are let go.
From J.Paps, Miami, FL Wow, reading this Jim R. character makes me feel lucky by not having to face someone like him up until now. It is a shame people feel this way about an employer. Hey Jim R., do you speak out these thoughts at any point on your job interviews? not so huh? so you cheat!
From Ben F Ranklin If it's a well run business, it doesn't have to worry about getting employee's to sign non-competes, or any other such nonsense, does it… If a company has to use such tactics, consider working for a different firm…
From Michael , Kansas City MO I would never take anything from Sprint. The company's "trade secrets" and internal processes are the poster child of inefficiency.
From Alex, Loudoun County, VA An employee would typically sign an NDA (Non Disclosure Agreement) when they are hired, and not when they are fired.
IMHO to make an employee sign such an agreement when they are fired is unethical and demeaning, and is not "common sense", unless the employer gives some sort of compensation to keep company secrets (such as a sevarance package). Even though I've signed a NDA with my current employer, I really don't think they would hit me over the head with it if they gave me my walking papers.
I feel that this article was rather poorly written, as it seems biased towards an employer and not towards an employee.
From Jim R Frack 'em. Steal everything you can as you are marched out the door. Steal all their physical property. Steal their client lists. Steal their intellectual capital. They don't give an d@mn about you, return the favor.
From Scott, East Hanover, NJ Justin shows that a thimble full of knowledge is dangerous. And using the 13th amendment as a defense to its enforcement? Wow. Absent the preence of fraud or duress, of course it will hold up in court. Shame on you Justin for holding yourself out to be someone with a brain and having common sense.
From Amanda Brand ..Yes, not to mention the shock, fear and career loss after some of us spent years in building the company, pampering it like a little baby! I lost my Newspaper job a few days before Christmas! Terrific huh? As a single mother I had spend my whole life getting where and what i have today – only to slowly see it slip away by a bunch of arrogant, no-nothing corporate leaders whom do NOT deserve hiding behind "poor" economic times. Incompetence, corporate America are the single culprit for thousands like myself!!! When will we take back the power from these greedy buggers?!! No government bailouts for these companies!
From C.D., Philadelphia, PA To Kevin– slimy indeed, but what do you expect from corporate lawyers? They are paid to be slimy and assist companies even when it's to the detriment of their employees or customers or both. And yes, the non-compete stuff is bad advice not only because it's slimy but because it may not apply in a layoff situation, and it's only tangentally related to the original question.
From terry Hendrickson, Greensburg PA As Rich K says, confidentiality agreements are almost standard for new hires.
I am in favor of confidentiality/non discosure agrrememnts as well as having a clearly defined policy on what data is covered.
As mentioned before, I have contracted with a large number of companies since entering the IT field and have signed confidentiality/non disclosure agreements as a mattter of course.
Most are reasonable.
The problem arises when companies require some one to sign an unreasonable contract to work there.
Altough these contracts are most likely unenforceable, the cost of fighting them can be high. Additionally, you new employer can be included in any litigation.
Companies can, and do, use these agreements to bully employees.
I will repeat my statement that reputable firms do not use these tatics.
I can only speak for myself, but I would not want to work for a company who would use these tatics. Based on first hand experience as well as talking with other in my field, companies requiring non compete agreements usually act unethically in other aspects of there business as well so why deal with them?
That being said, as a matter of ethics, taking trade secrets, customer lists and similar information from a previous employeer is unethical as well. That should go without saying
From Jonh, La Jolla CA Ah… So not only do they fire me, they also restrict my capability to find job in future. Sounds soooo reasonable…
From Rich K., Danbury, CT Confidentiality Agreements and Non-competes are commonplace new hire paperwork these days. However, no company would ever justify the expense of legal counsel to prevent someone from working for the competitor. Your thoughts are nice on paper, but don't translate to any workable practice in the real world.
Moreso, these two aforementioned documents generally apply in most states to situations where an employee quits voluntarily, not when he/she is laid off or fired.
From Roger, Raleigh, NC Any worker with a brain cell would already have a personal database of all the contacts and clients from every job they ever had. We are all free agents in this corporate culture. Business intellegence is crucial in having a long and successful career.
There is very little unique company data that can't be reconstructed so I wouldn't worry about terminated employees walking off with company data. Unless you have a secret formula for a product, you spend too much energy worrying about this topic. Worry about the things you can control.
From Jeffrey K., Long Island, NY How do you implement a non-compete agreement for a laid off employee" The mere fact that you just laid off your employee is degrading enough in that layoff's suggest the former employee did not do anything to bring the layoff upon themselves. Then you slap a non-compete agreement on them and they are bound by the contract to not work for a competitor? I can understand a non-compete agreement being in effect for an employee who brought it on himself to be fired. And I can understand implementing a rule which ensures the former employee (laid off or fired), does not take clients with him. But it is a sad slap in the face to ask that the former employee — a laid-off former employee — doesn't go to work for local competitors. A layoff does not justify this and does not justify that a former employee having to relocate because a company's clientele might be threatened.
From Kevin, Reston, VA This advice seems… slimy. The question was how to prevent company data from leaving the company. Not how to undermine the employee's ability to find work (that you just layed off). The only thing you can really do is to physically prevent them to get access to the computer they worked on. Problem with that though is what if they have their own files they need access to?
From Chris, Charlotte, NC Including a non-compete in a severance package?! Nothing like adding insult to injury!
From Terry Hendrickson Greensburg PA Just a note to Curmudgeon re his/her reply:
Per my understanding, to be enfoceable a non compete agreement must be
1 reasonable in time and scope.
2 necessary for the protection of the party for which it is to be enforced
3 must not create an undo hardship for the party against whom it will be enforced
I have never seen a non compete agreement in my field which met all these requirements.
However, it is important to realize that companies have lawyers and laws are whatever the courts determine them to be.
The individual has to pay his own costs unless you can win a counter claim that would pay your costs.
Fighting an unfair agreement that you signed is an uphill battle and can be very expensive. It is best to not sign one that is unreasonable and avoid problems
The last I signed was in 1983. I have read each offered since then decide not to sign. I have never regreted my choice not to sign.
I know states vary on this of course. But I have not seen a reputable company require an unfair non compete agreement since they know what is enforceable.
And I am not a lawyer either. But I have read several college level law books on this subject before forming my opinion.
From Justin Washington, DC Folks, a Non-compete typically will not hold-up in a court. I am disappointed in CNN for picking an Attorney who has never defended this in a courtroom. If she had defended it, then she would know every employee's Attorney uses the 13th amendement as their argument( i.e. abolishment of slavery). Shame on you CNN for publishing this misinformation.
From Donna Lee, Mechanicsville, VA Jason,
That is not totally correct. Sure a non-compete can be that, but a non-compete can also state that you cannot work in the same position with another company for a specified period of time. My husband who is in high tech electronic sales has been asked on several occassions to sign one and each time, he has refused.
From A. Woukie, NY, NY My boss told us recently that there is no such thing as loyalty and no employee is indispensable. He can't expect any dispensed employ to not compete now unless he antes up mucho dinero.
From Sara Johnson Clark,NJ With non-compete, in generalthey can only be used if you are voluntarily leaving your job, also if they prevent you from going to a competitor they can be required to pay your salary you would have gotten at your new employer for a year while you sit home and watch tv
From Tony Manero, San Francisco, CA If I'm laid off from a company, all bets are off. Basically, all employees are free agents in the New Capitalism world, so anything that impairs your right to earn a living can be reasonably ignored. I consider "knowledge" gained on company time to be shared so I'm not selectively forgetting in my next job just to comply with any agreement.
From Luke, Vienna, VA Broad non-competes are never enforceable and some states like California don't allow non-competes at all. In Virginia, it's allowed if it's narrow in scope (particular clients or geography) depending on the business and its reasonable survival needs. It could not reasonably prevent someone from getting a job.
The ideal non-compete helps the company and all employees who are in it. While you may not want to sign that for yourself, would you want to work at a place where others could damage the company and cause you to lose your job? Hopefully, the personal freedom loss is balanced by the plus of better protecting and preserving your job there.
Non-solicitation clauses are also useful to prevent former employees from raiding their old employer's people.
From Terry Hendrickson I would never sign a non compete agreement again. I did that once and was laid off the next day (along with others). I was able to get around it though but it was a very difficult time.
I agreee with non disclosures and confidentiality agreements in most cases. As a software/database developer, I have signed many of these while contracting for various ompanies.
A company does have the right to protect their private information.
But non disclosure should be limited to business information. It should not be used to prevent an ex employee from testifying in court on criminal or civil matters as is often the case.
As far as soliciting existing customers, I also agree that should be prohibited for a reasonable time. The scope should be reasonable as well. I have seen these agreements that refer to "potential customers".
Never underestimate the greed of the company you work for.
That being said, when handed an unfair agreement, keep looking. Any company requesting an unfair agreement is a good place to run away from as fast as you can. If you are good at what you do, you can find work without this nonsense
From Curmudgeon, Nashua NH So, this is really bogus advice, you know. A noncompete agreement rarely applies when you lay someone off, unless you pay them due consideration for that agreement (usually at least 6 months severance, and often more). Like any contract, there has to be a quid pro quo, and a layoff without significant severance doesn't count. Period. Disclosure, I am not a lawyer, but I recognize bogus advice when I see it.
From Chris, Washington DC I have to agree: If you really don't want your now-fired employee to compete with you for a year, then give them a year's severance pay.
That would be fair. Anything less is quite manipulative at best.
From Keith, Raleigh NC I agree with Donna – to lay off an employee and to tell them "Oh, by the way, you can't get a job in your field or the competition" is just demoralizing.
Also, a non compete would probably be difficult to enforce against a worker who did a great job but was laid off for economic reasons. You can't preclude someone from earning a living, especially in this current market.
I think that it's important to foster a sense of trust in your workplace to avoid these kind of problems.
From Michael Hawk, PLano, Tx Perhaps of companies wouldn't lay off so many people in the first place, they wouldn't have to worry about it. Take HP's buyout of EDS. They got rid of over 24,000 employees. I know for a fact that a lot of company data walked out the door with them and I say 'Good Riddance!".
From Scott, Pittsburgh PA Donna,
There is nothing wrong with having an employee sign a non-compete though it is usually easier to have them sign one at the time you hire an employee than when you let them go. At the time they are hired, they would know what you expect and can weigh the position versus the contract. Again at the time an employee is let go, the employee would be offered a longer severence in order to sign a non-compete and thus are being compensated for the contract. If you think is unreasonable, then don't sign the non-compete and you will either not be hired or let go with less severance.
From Jason New York, NY Dear Donna Lee,
A non-compete is an agreement that they agree not to solicit any current clients for a specific period of time.
From Donna Lee, Mechanicsville, VA I am not sure I have an answer or a suggestion, but rather than have your employees sign a non-compete which in my mind is totally unreasonable, how about having them sign an agreement that they agree not to solicit any current clients for a specified period of time? To tell an employee that has just been laid off, that they can't continue in their profession for a specified period of time is just downright selfish. I personally, would NEVER agree to sign that. I have a family to support and I will do whatever is necessary to insure that I will still be able to support them.
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I have been laid of since March 2009.
I have visited banks for small loans and not one has responded. I need someone to help me expand my business. It is not easy to secure a job. I would like to do something that will benefit me and my family. Please help me.