Jen Mellon on Workplace Incidents: Non-Compete/Non-Solicit Violations Part I
Hello! I am Jen Mellon, the Co-Founder and President of Trustify. Today, I will cover Workplace Incidents: Non-Compete/Non-Solicit Violations as part of our Truth & Trust Lifecycle Series.
Recently, we’ve seen an uptick in employees using former employer's information and resources to compete with them or launch their own ventures. When I first got into the business world, lawyers repeatedly told me that there is no way to enforce non-solicit or non-compete agreements. To some degree, they were right, but now we are seeing more employers using RPIs to get evidence against former employees.
Recently, we worked with a large client that was dealing with an employee who had encouraged other employees to join him in order to compete with our client. We ended up doing surveillance on the employees when they showed up and all went into the same office together. We had PIs there taking pictures, which is pretty damning evidence. No longer does a company just have to throw their hands up and say there is nothing that can be done.
Because of how people now think of work, non-compete and non-solicit violations have increased. Most employees no longer think they will be with one company for a lifetime. Employees are almost always wondering what’s next, even if the thought is in the back of their minds.
So while it’s great to hire go-getters because they will naturally have a lot of great ideas and build great connections within the company, the downside is that they will also be the most likely to later compete with you or solicit other employees for their own ventures.
It’s also true that the world has flattened in terms of information. Even within the same company, information is being dispersed to possibly multiple offices in multiple countries. This opens up a wider possibility for abuse of information. It also creates a greater possibility that some employees will be snatched up by other competing ventures.
Think You’re Protected?
We work with many companies that thought they were protected because their employees signed the normal paperwork. That's kind of every story. The company feels they have covered all their bases. They have the forms. They have the handbook.
The problem is that this is faulty logic, and you will know that once you have been through a lawsuit situation. You might not think you are liable and that you would win in a lawsuit, but it’s not as easy as having an employee sign a piece of paper. Once an employee breaks a non-compete or non-solicit agreement, you have to pay for the whole legal process. We watch TV and hear about the person who got burnt by the McDonald's coffee and won a million dollars. We think if we have a simple case to make, we can win in court. But for the most part there’s very little upside to any lawsuit.
Once you get to the legal process, the damage is done, and your odds of remediation are very low. The trick is to go into offensive mode to begin with. The sooner you catch an employee, the better off you will be long-term. If you catch an employee a year in, after they have stolen all the info and taken several other employees with them, good luck. Even if you win the lawsuit, you still have to actually collect.
The bigger issue here is that many small businesses, who are basically existing paycheck to paycheck, can’t afford a case like this. They have to catch the problem early so they can use a cease and desist or simply send a letter to the person—enough to keep the issue from getting any worse.
Here is the key to remember: having an agreement in place is not enough; you have to actually enforce it. Even if you are right in a legal situation, it doesn’t mean you have a strong case; you have to have proof. Yes, have employees sign the non-compete and non-solicit agreements, as a scare tactic if nothing else, but don’t assume that’s enough.
The best place to engage a company like ours is early. If you even suspect an employee is thinking of competing or soliciting employees, you can benefit from keeping an eye on them. We can identify the truth and really nip the problem in the bud right away, before it festers into something more significant.
Competitor vs. New Company
In many cases, an employee is not necessarily going to a competitor but is starting something new. If you are an innovator in your field, you have to be especially aware of employees who would want to take company knowledge because they feel they can do the same thing in a better way as a competitor.
The effect of a new competing company depends partly on the level of the employee who decides to leave. If we hire a great VP of Sales or VP of Business Development, each of them will have intimate knowledge of the inner workings of our business. If they go start another Trustify or work for a competitor, the damage would be great. On the other hand, if a lower level employee wants to go do the same thing, it may not matter as much. That said, almost any employee is going to have a certain level of access to information that you don’t want them taking anywhere else.
Sometimes, employees who are still working for the company are funneling information to somebody who isn't. One good example has been all over the news: the mole in the White House that our president keeps talking about. We do get involved in different political matters, whether it's at a local, state, or federal level, and we have gained some insight into these situations. It's interesting to notice how much opposition research is happening and to observe the level of concern over information sharing.
In these cases, we look for relationships and who's connected. Who was together? When and where were they together? By focusing on relationships, you can get to the truth. You have to understand how to find multiple degrees of separation. Sometimes, we even find a smoking gun.
When we found out the connection in the medical marijuana case, we discovered a treasure trove of information that linked people together. And that was almost entirely through cyber investigation. In that case, the government official giving the license to their buddy probably had some skin in the game. In that sense, it was similar to how non-compete cases work. Someone was using and giving away information for their own benefit. They were sharing information with a friend for their own gain, and the action was corrupt.