There has been much debate and controversy surrounding the FTC’s proposed rule banning noncompetes. The future of the FTC rule and legality of noncompetes remains uncertain. Until the FTC rule becomes law, noncompetes and other restrictive covenants remain generally enforceable under Georgia law.
Restrictive covenants can be useful tools to protect a company’s confidential and proprietary information both during and after the employment relationship. This can include customer lists, trade secrets, goodwill, and customer relationships.
But having restrictive covenants in place is not enough to protect an employer’s information and relationships. How do employers best ensure that the restrictive covenants are being honored, especially after the employment relationship ends?
A thorough and thoughtful exit interview is one of the most effective and overlooked steps employers can take to protect their business from unfair competition. Employee exit interviews are a great time to remind employees of their obligations and ask about their future plans. To ensure open dialogue and honest feedback, the exit interview can be conversational and allow the departing employee time to ask questions.
EXIT INTERVIEW STEPS
Review the terms.
Employers should review any agreement’s terms with the employee and ensure the employee understands his/her contractual obligations. Provide copies of the agreement to the employee and consider having them sign to certify that the agreement was reviewed and provided. This may help prevent any later claim that the employee was not on notice of the restrictive covenants and might help thwart a potential breach.
Identify confidential information.
Employers should communicate what constitutes confidential information and trade secrets and note that taking, using, or disclosing confidential information or trade secrets constitutes a breach of the agreement. Also, remind the employee of additional federal and state laws that prohibit the use and disclosure of trade secrets. These laws still apply if the restrictive covenants are later deemed unenforceable.
Ensure the return of property.
Employers should demand a return of all company property, including computers, customer lists, and other sensitive information.
Ask questions to determine if the employee downloaded or saved company information on thumb drives/external drives or sent company information to a personal email account. More times than not, this has occurred.
It may be necessary to set a protocol to allow the employee to retain all personal information. If so, promptly change passwords and limit the employee’s access to company information. Employers should consider requiring the employee to sign an agreement acknowledging all company property and confidential information was returned.
Confirm the employee’s next steps.
Employers should also confirm the employee’s new job role and responsibilities to ensure he/she will not be in blatant violation of the employment agreement.
Remember to ask what kind of information the employee will have access to, what geographic scope he/she will be working in, and what kind of contact he/she will have with customers. If the employee is truthful, this might help alleviate concern or position the employer to take immediate action. However, if the employee is untruthful, this might help discredit the employee in future litigation. Finally, if the employee refuses to answer, the employer should immediately take steps to monitor the employee’s actions after separation.
Obtain updated contact information.
Lastly, the employer should be sure to obtain the employee’s updated contact information. Should suspicion or confirmation of unlawful activity arise, this will make contact after separation much easier.
WHEN TO SEEK COUNSEL
If an employer catches wind that a former employee is likely violating his/her restrictive covenants, the employer should seek legal counsel for help. Seeking counsel at an early stage can be effective to promptly stop unfair competition and avoid common pitfalls.
An attorney may alert the new employer of the employee’s restrictive covenants or send a cease and desist letter to the former employee and new employer. If the employer feels it may be irreparably harmed by the former employee’s breach, an emergency motion for a temporary restraining order or injunction may be necessary to halt the breach and protect confidential and proprietary information. Federal and state laws provide many avenues to adequately remedy employers through monetary damages and equitable relief.
Employers should schedule and conduct exit interviews with departing employees that are subject to restrictive covenants. This can ensure the employee is on notice and that he/she has not improperly taken any company equipment or confidential information. A quick, effective exit interview can save the employer time and money if litigation is likely. In fact, it may be crucial to enforce the restrictive covenants and protect sensitive business information.
As always, please let us know if we can help.