“So we change partners. Time to change partners. You must change partners. Again.” — Stephen Stills
Most of us will change jobs at some point in our career. According to the Bureau of Labor Statistics, the average person born in the later years of the baby boom held 10.8 jobs from age 18 to age 42. Forrester Research predicts that millennials will hold 12-15 jobs in their lifetime.
Job transitions often lead to litigation with a former employer. Executives must be aware of the most common claims that employers bring against departing employees. The last thing you want to explain during your first week on a new job is that you’ve been sued by your former employer.
I regularly advise executives regarding job transitions. All too often, I get a call after a lawsuit has been filed and a temporary restraining order has been entered to prohibit an employee from working; restrict them from soliciting customers; and require them to produce their thumb drives, laptops, and mobile devices for forensic inspection. Over the years, I’ve developed this list:
Top 10 Things Employees Do That Get Them Sued by a Former Employer
1. Assume Your Non-compete Isn’t Enforceable
I’ve lost track of the number of times I’ve heard a client say “I’m not worried about taking a job with a competitor. My [insert brother-in-law, cousin, hairdresser, bartender] told me Texas is a ‘right-to-work state’ and non-competes aren’t enforceable here.”
There is so much wrong with that statement. First, “right to work” has nothing to do with non-compete agreements. In a right-to-work state, a person cannot be denied employment because of membership or non-membership in a labor union. Second, taking legal advice from someone who does not practice in this area of law is risky. Third, non-compete agreements can be enforced in Texas if they meet the statutory requirements. Ten years ago, it was relatively easy to avoid enforcement of a non-compete. In recent years, however, Texas courts have reviewed non-compete agreements more favorably. A series of Texas cases have confirmed that non-compete agreements will be enforced if the restrictions are reasonable in duration, geography, and scope of activity restrained.
2. Be Dishonest or Evasive About Your Future Plans
You turn in your resignation. You thank the company for the opportunity to work there and wish them well. So far, so good. Then your boss walks in and says, “I’m sorry we’re losing you. What are your plans?” Wanting to avoid a conversation about your non-compete, you respond, “Not sure yet. I’m going to take some time before I decide. I may work with my uncle in his construction business.” If that’s true, great. But if you signed an offer letter with a competitor the week before and you plan to start on Monday, that’s a problem. “Transparency” is a hot buzzword, and it applies in this situation. If there is going to be a dispute about the enforceability of the non-compete, it’s better to figure that out immediately. And, I’d much rather walk into court saying, “My client didn’t view the new employer as a competitor and was upfront with her former employer about where she was going,” than to have to defend lies or evasion.
3. “Warehouse” Sales or Take Business Opportunities
This is a big one. Depending on their position, employees may owe fiduciary duties to their employers. While someone is still employed, they have a duty of loyalty to act in the best interest of their employer. The fiduciary obligation means that employees (both at-will and contractual) cannot solicit company clients or other employees prior to departure. This obligation not to solicit may extend post-departure if an employee has a contract with a customer or an employee non-solicitation provision.
One type of breach of fiduciary duty is “usurpation of corporate opportunity,” or taking a business deal that should have been presented to the former employer. Holding or “warehousing” sales to take to a new employer is a big no-no. So is keeping an acquisition opportunity under wraps and pursuing it at your new gig.
4. Moving Your Best Customers with You
If you have a customer non-solicitation agreement and the restrictions are reasonable in time, scope, and geography, a court will likely enforce it. If you solicit customers in new locations that you never met or dealt with in your old job, that may be a reasonable activity. However, if you try to move your top customer that was developed from a lead the company gave you, you’re waving a red flag in front of the bull. Non-solicitation agreements are viewed under the same framework as non-compete agreements, so reasonableness is the key to enforcement.
5. Leave with a Group of Employees
One employee leaving to join a competitor can often be navigated without controversy. However, two or more employees leaving together to work for the same new employer is a common litigation scenario. If employees have a “no raid” provision that prohibits solicitation of co-workers to terminate employment, the employer may sue for breach of contract. In addition, you may draw a tort claim for tortious interference with a contract by knowingly inducing an employee to breach his contract with the company.
6. Download Company Documents
This is the most certain way to end up facing a lawsuit from your former employer. I’ve had dozens of cases with a variation of this theme: Download files to a thumb drive/forward company documents to personal email/upload documents to cloud storage.
Everyone gets caught, almost no one is clever enough to do this without leaving a digital footprint. It’s prohibited by common law, the Texas Uniform Trade Secrets Act, and non-disclosure/confidentiality agreements. Don’t do it. Ever. Assume EVERYTHING belongs to your employer except your plants and family photos (and they may own the plants). Forensic inspection of computers and devices virtually guarantees any downloading or copying activity WILL be discovered.
7. Use Company Resources to Land Your Next Job
Under Texas law, employees may take certain limited preparatory actions (i.e. look for other job opportunities, interview with other companies, etc.) while still employed. Such actions, however, should be done off the clock and not using company resources. Using a company email address allows your employer to read all your job search emails. Avoid using company computers to access personal email as well since that activity can lead a digital footprint on company devices. It should go without saying that travel expenses for interviews shouldn’t be charged to the company but I’ve seen it happen. That’s not a fun exhibit to have to explain to a jury.
8. Hold Company Property “Hostage” While You Negotiate a Severance Package
Like #6, it’s a bad idea to retain any company property after resignation or termination. I’ve had employees tell me, “I’ll send my computer back when they pay me what they owe me.” Nope, send it back now. Keeping a company computer WILL get you sued. Most employment agreements require employees to return company property immediately, or within a few days, upon separation. Do it. It’s the law. Causes of action for retaining company property and records include misappropriation, conversion, and theft.
9. The “Take This Job and Shove It” Conversation
I get it—you hated working there, they passed you over for promotion, and they underpaid you on commissions. Take the high road and don’t burn your bridges. While it may be cathartic to cuss out the dirty, rotten scoundrels and brag about your plans to kick their posterior region in the marketplace, it’s not the best litigation-avoidance strategy. Gracious professionalism should be your goal in exit conversations—and don’t poke the bear.
10. Ignore the Cease and Desist Letter
Paragraph 23 in the Plaintiff’s Complaint: Employer sent a letter to employee requesting return of company property, certification he/she has retained nothing, and assurances of compliance with post-employment restrictive covenants. Employee never responded.
Don’t be an ostrich and bury your head in the sand. If you haven’t consulted with counsel at any point prior to or during the exit transition, now would be the right time to do so. “Going dark” after receiving a demand letter sends off warning signals to the employer. A professional response to assure that all company property has been returned is reasonable and appropriate. If there are open issues on compensation, reasonableness of restrictive covenants, or other matters, experienced employment counsel can often field those issues with the employer in a manner that avoids a courtroom brawl.
Although these are the most common employee behaviors that lead to litigation, there are many other instances that can trigger a lawsuit from an employer. The smartest thing to do is make sure that every action you take surrounding your departure is in full compliance with the law and any agreements you may have signed during your employment. Consulting with an experienced employment law attorney before switching jobs and heeding their advice is the best way to ensure a smooth work transition without having to endure the time and expense of being involved in a lawsuit.