(July 16, 2007)

Use and enforcement of non-compete agreements or other contractual restrictions on a key employee’s post-termination activities may be part of a company’s strategy for protection from “pirating” by a key employee who leaves to join or become a competitor, but there are other precautions a company can take in this situation.  For example, an exit interview process provides a valuable opportunity to discuss several important items with the departing employee and help secure the company’s customers, business information and workforce.  If there is advance notice of the employee’s departure, this process can take place in a series of interviews and “debriefings.”  If not, a comprehensive exit interview on the employee’s last day may be sufficient. 

Here are some of the objectives a company may seek to accomplish in an exit interview process upon a key employee’s departure:

• Make sure the employee returns all company property, especially any materials that may contain the company’s business or customer information, before he or she leaves.  This includes any data the employee has on a laptop or home computer related to the company, his or her work for the company, or its business with customers.
• Determine whether the employee has any personal notebooks, pocket calendars, rolodexes, business card collections, etc. that contain information about the company, his or her work for the company, or its business with customers.  If the information was acquired or developed during the employee’s relationship with the company, the company should be entitled to keep, or at least make copies of, these items. 
• If there is advance notice of the employee’s departure, make sure the employee introduces and transitions customers to his or her replacement or send a manager to secure these customer relationships.
• Remind the employee of any “confidentiality” policy or other applicable company policies, as well as any non-compete agreement or other contractual restriction he or she signed, and make sure he or she has a copy of any such policies and agreements.
• Find out about any new employment the employee has obtained or is seeking and assess whether it would provide him or her with an opportunity to solicit any of the company’s customers for sales of competitive products or otherwise compete against the company.
• Find out whether the employee has contacted customers he or she served during his or her  relationship with the company to inform them of his or her new employment, and determine whether the employee has indicated that he or she will contact them on behalf of his or her new employer.
• If the employee’s new employment will conflict with any non-compete agreement or other contractual restriction he or she signed, confirm that the new employer has been informed of the employee’s non-compete agreement or other contractual restriction.
• Determine whether the employee has talked with any of the company’s other employees about the possibility of leaving the company or any opportunities that may exist for them with the employee’s new employer.

Absent a non-compete agreement or other contractual restriction on a key employee’s post-termination activities, it may be difficult for a company to prevent some customers and employees from following a key employee who leaves to join or become a competitor, but taking some of these precautions may help the company limit its losses.

For questions regarding this Alert or other employment matters, or assistance with matters involving departing employees or non-compete agreements, contact Louis Meyer at 919.783.2810 or lmeyer@poyners.com, or Susie Gibbons at 919.783.2813 or sgibbons@poyners.com.