Departing Employee Obligations

by Jaburg Wilk

Jaburg Wilk

Employees who depart their employment do not always think about obligations they may continue to have to their former employer.  Former employers do, however, and should never underestimate what a departing employee may or may not understand about such post-employment obligations.  There are methods and procedures that can mitigate potential problems for both departing employee and former employer.

Non-Compete and Customer Non-Solicitation Agreements

Departing employees often forget about the documents they signed when they were hired, perhaps many years ago.  Those documents are likely to include a non-compete agreement, a customer non-solicitation agreement, or both, that expressly prohibits or limits the employee’s right to work in a competitive business or take the employer’s customers with them when they leave or are terminated for any reason. 

Arizona law is tough on the enforcement of both non-compete and non-solicitation agreements.  The agreements must be reasonable in time (how long does it last?), geographic scope (what county, city or area does it apply to?), and restricted activity (what exactly does it prohibit or limit the employee from doing?).  They are frequently contested and litigated.  This does not mean they are never enforced, however, and neither the employee nor the employer should assume they will be enforced or not, depending on what side you are on.

In fact, regardless of which side you are on, you should always assume that such agreements can be enforced if they are narrowly tailored to be plausibly reasonable when the time comes to test their validity.  Departing employees should be warned, however, that even the most overbroad, sloppily crafted non-compete or customer non-solicitation agreement can be a major headache if the former employer wants to make it an issue and threatens to sue to enforce its rights.  Lawsuits mean attorneys, time, and money that the employee or employer may not be willing to bear. 

The best practice is to pay an attorney to draft or review and advise about a non-compete or customer non-solicitation agreement up front rather than pay far more to have the issues debated in court.  As some would say, you can pay me now or pay me more, later. 

Employer Confidentiality and Trade Secrets 

The documents departing employees may have forgotten they signed often include confidentiality agreements that protect an employer’s sensitive and confidential information from theft or unauthorized disclosure or use.  Although these agreements are also frequently contested and litigated, they are much more likely to be enforced if push comes to shove.  They do have to be reasonable in scope and limited to only truly confidential matters, and both employee and employer should bear in mind that the employer’s rights to protect truly confidential information or trade secrets (a specific category of confidential information protected by state and federal statutes) can be enforced without a written agreement. 

As any competent attorney will tell you, it is always the best practice to get it in writing.  It pays to pay an attorney to draft or review any such agreement up front rather than pay the attorney far more to debate the issues in court.  Again, you can pay me now or pay me more, later. 

Exit Interviews 

Whether an employee quits or is terminated, best practices also include a comprehensive “exit interview” to discuss the departure and remind everyone about their post-employment obligations.  The employer will want to know the good and bad of the employee’s work experience and how it can do better in the future to attract and keep valuable employees.  Both employee and employer will be best served to review any agreements the employee may have signed as a condition of the employment and other obligations the employer may want to enforce after they go their separate ways.  Any subject either one thinks may be contentious or lead to legal action can be brought into the open and possibly resolved before anger and emotions lead everyone to lawyer up.  Remember that solutions and settlement are far better (and cheaper) than litigation and that a competent lawyer can help you to achieve either outcome.

Your choice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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