A Plotter's Guide: How To Stage A Coup In Your Company

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A Plotter's Guide: How to Stage a Coup in Your Company

posted 2 years ago

If you are going to stage a coup in your company, here is what you must do.

Recently, we highlighted the risks of employees staging a coup by departing with the intention of usurping their employer’s business.

That is obviously fraught with risk and invites litigation from the employer, which is costly and can stop you in your tracks.

Having said that, every employee has the right to seek a better opportunity.

If you are thinking of departing, here is a checklist of things to do and refrain from doing to minimize the risk of a successful lawsuit against you:

1. See an experienced employment lawyer.

2. Check your employment agreement — does it contain restrictive covenants which prohibit the very action you are contemplating i.e. competing or soliciting customers? Ask your lawyer if it is enforceable. The new Ontario legislation prohibiting such contracts is not retroactive. If existing restrictive covenants are too broad, i.e. too long in duration or wide in geographical scope, such as to provide more protection than the employer legitimately requires, they will be unenforceable.

3. Use social media to your advantage. If you have a non-solicitation covenant, join LinkedIn or other business networking sites immediately and look to add your customers as your followers. If, when you later leave your employer, you post that change on LinkedIn, your followers will learn where you now are and may well approach you. This avoids your soliciting them and potentially being in breach of the restrictive covenants in your employment agreement. But if they are not already following you, adding them after you depart is a ticket to a lawsuit.

4. If you do not have an employment agreement, are you a fiduciary (usually a director or senior officer)? If so, there may be restrictions on what business activities you can engage in when you leave. Fundamentally, you cannot usurp business opportunities including your former employee’s customer base by soliciting them.

5. Do you have a company supplied email address, cell phone, laptop or desktop computer? If so, the company can legally read your emails and search your hard drive before and after you leave. Therefore, as soon as you seriously contemplate leaving, obtain a personal email address, personal cell phone and laptop on which to conduct your planning. If you have a company supplied device, ensure you only delete personal information (family pictures, personal financial and/or banking information). You should make a forensic copy of the hard drive of any such device to show what was on your hard drive prior to your departure in order to defeat unwarranted allegations of deleting company records. Deleted emails can usually be recovered unless you wipe the hard drive but, if you do any deletions, expect your employer to argue that you deliberately deleted incriminating information because it was damning.

6. Do you have access to confidential company information such as trade secrets, costing information, price and customer information, which the company has not published or which is not publicly available? If so, you need to ensure you do not download or email it to yourself. You cannot use such confidential information in your new business. But if you acquired skill and experience in the course of your employment (as opposed to confidential information), you can take that with you whether to another company or your own business.

If you want to leave, make a plan. If you have valid restrictive covenants, you can plan your next move and be ready to leap into action as soon as they expire. Your plan should include protection against unwarranted allegations of impropriety, of the sort discussed above, by your former employer.

Employers should also protect themselves from employees leaving and taking their intellectual assets and goodwill:

1. Have employment agreements with enforceable restrictive covenants. They should be reviewed regularly to ensure they remain enforceable as the law has changed regularly.

2. Supply key employees with company-owned cell phones, laptops and desktops so you own all the information on them (even the personal information of the employee). Require that all business be conducted on those devices.

3. Monitor employee use of company-owned devices. If you detect any unusual activity, e.g. downloading company information onto an external non-company owned device or an employee emailing large quantities of sensitive information to their personal email addresses, determine what information has been transmitted and conduct a prompt investigation. Interview the employee immediately if there is a whiff of impropriety.

4. When an employee leaves, do not redeploy their devices until you make forensic copies of the hard drives. They will show you what the employees did up to the date of departure. And, if anything was deleted, take steps to have that information recovered.

5. Ensure you own all business related social media sites and addresses so, when an employee leaves, you can continue to post information and access the feeds. Do not let employees open such sites in their own names.

6. Make sure confidential information is properly identified and protected. If electronically stored, ensure it is password protected. If in paper form, place it under lock and key. And restrict who has access. It should be on a ‘need to know’ basis.

7. When a key employee leaves, make sure you send a letter to them and their new employer confirming their legal obligations and, if they have engaged in any improper activities, send a cease and desist letter and be ready to seek an urgent injunction to stop the improper activity immediately. In this area, sitting on your legal rights terminates those legal rights.

BY HOWARD LEVITT AND ROBERT TAYLOR

Howard Levitt is Senior Partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practises employment law in eight provinces. He is the author of six books, including the Law of Dismissal in Canada. Robert Taylor is with Levitt Sheikh.

THIS ARTICLE ORIGINALLY APPEARED HERE: https://financialpost.com/fp-work/a-plotters-guide-how-to-stage-a-coup-in-your-company

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