How to Avoid Getting Sued by a Former Employer

How to Avoid Getting Sued by a Former Employer

If you are recruited to work for a business that competes with your current employer, you could find yourself slapped with a big fat lawsuit over intellectual property theft, even if you did nothing wrong. Here's how to prevent that nightmare.

What can the new employer do to protect itself?

They should put in writing a set of guidelines as to what the new employee can and cannot do with respect to information from the old employer. If the employee violates any of those guidelines, it could result in termination or the withdrawal of any indemnification promise.

For example, the employer could say, "We are hiring you and want to make sure you are not bringing with you confidential information, that you have not copied or downloaded anything, that you have not kept copies at home, that you have not contacted any of your former customers until we do so in coordinated manner, and if for any reason we find out you have done any of the above, you could be disciplined up to immediate termination."

What about tacit knowledge, the information in employees' heads? Could an employee get sued over that?

The law treats tacit knowledge just like it was knowledge on a piece of paper. There are clear, established guidelines as to what is acceptable and unacceptable behavior on the employee's part in what is called the Uniform Trade Secrets Act that courts in California have adopted, and which I think has been adopted in 40 states. Even with those guidelines, it's hard for employees to follow those rules, particularly if they're in sales because that's how they make their money.

What you can do is send out an announcement about your new job that has all your contact information, but it can't be a solicitation. Just a tombstone announcement: 'So-and-so has gone to work at X and here's the phone number.' Then you sit back and wait for the phone to ring. If customers call you, you are free to talk to them and you will be protected under the law.

If employees can e-mail past clients to tell them they've taken a new job, does that mean they can take those clients' e-mail addresses and phone numbers with them when they leave an employer?

No court in California, no published opinion has answered that question.

If information is taken solely for the purpose of sending out an announcement and you can prove that, that may be acceptable to the courts. What the courts have said very clearly is that employees have a right to announce a new affiliation because they have a right to be in business and to move between businesses. Courts don't want to restrict employee mobility. As a consequence, I'm in uncharted waters here, but I think the courts would be prepared to give a certain amount of leeway to employees so long as they were not using customer information for any other purpose.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags corporate issues

Show Comments