Wednesday, September 15, 2010

It’s Never “Too Little Too Late...To Be Proactive.”

Why EXIT INTERVIEWS Are a Key Proactive Lawsuit Prevention Strategy.

An Exit Interview is an interview that is usually conducted when an employee is leaving or exiting the company, hence the name. It is often done after an employee gives notice, resigns abruptly or on occasion, upon termination. The Exit Interview can give a company many insights into how it can improve its management style or benefits since the exiting employee is frequently honest with candid criticisms of the company, his or her manager or the industry – thinking they have little to lose heading out the door. More importantly, the Exit Interview can be a strong lawsuit prevention tool used to identify potential lawsuit grenades and diffuse them before they turn into expensive litigation.

The Exit Interview Can Be Used to Prevent Trade Secret Theft and Unfair Competition.
The interviewer should carve out time in the exit interview to “review” contract provisions or handbook provisions that the employee agreed to during employment that bind the employee after he or she leaves the company. For example, if the employee signed a contract that prohibits the disclosure of confidential information or trade secret information, that information cannot then be used or disclosed to a subsequent employer. Upon exit, the interviewer should ask the employee if he or she remembers signing this agreement and if he or she understands that the company will protect itself if these trade secrets are disclosed to competitors. If an employee begins to argue about the wording in these provisions or whether or not they are legal, this is a red flag for the employer that the employee is considering violating the provisions or agreements.

In recent headlines, Hewlett Packard’s CEO, Mark Hurd was “asked to resign” for ethics violations. Soon afterwards, he was hired by Oracle, Hewlett Packard’s competitor. Hypothetically, if Hurd had been interviewed as he was leaving HP and he indicated that he intended to work for Oracle soon after leaving HP, the former employer might have structured a severance payout over time, rather than pay him all up front. Moreover, the statements he made during the interview regarding his understanding of confidential information and trade secrets could then be used to ensure he upheld those agreements in the future. Any “differences of opinion” could have been negotiated into his severance agreement beforehand. The Exit Interview might have prevented the existing lawsuit HP filed last week to recover the multi-million dollar payout and prevent Hurd from disclosing HP’s trade secrets to Oracle.

The Exit Interview Can Be Used to Prevent Unfair Competition and Ringleading Behavior.
Although covenants not to compete which prohibit employees from competing with their former employer are, generally, prohibited in California, some states do allow them. Also, California has carved out exceptional situations where a covenant not to compete is permissible, such as the sale of a business or in LLCs. In these circumstances, the Exit Interview is an ideal time to inquire as to what plans for employment the departing employee has and whether he or she intends to directly compete within the industry or ask other employees to leave with him or her. If the employee volunteers that he or she is intending to compete, this is an ideal time to remind the employee of their continuing obligations and that the company will vigorously protect its interests from unfair competition.

In addition, many employees are unaware of provisions within contracts they have signed or handbooks that prohibit them from ring leading other employees out the door. In the event that the exiting employee says that that they are aware of other employees leaving, it is the right time to explain that unfairly competitive actions, such as destroying documents, refusing to return property, leaving at once, or other malfeasance that impairs day to day business operation are actionable. These questions and the information that they solicit can protect a company from the “shock” that a mass exodus causes.

The Exit Interview Can Be Used To Prevent Theft or Disclosure of Intellectual Property
In technology industries, for example, many employees sign agreements that state that their ideas and inventions made during their employment term are owned by the company through assignment. During the Exit Interview, the interviewer can ensure that the exiting employee truly comprehends that he or she may not own the work that they spent five years on when they leave, even if their name is on the patent. Any “confusion” or “disagreements” can be worked out well before the employee begins working for a competitor and attempts to use this technology for the benefit of another so that future injunctive relief is proactively prevented.

The Exit Interview Can Be Used to Prevent Unlawful Solicitation of Customers or Clients.
In industries where customer lists are the primary asset, the interviewer should ask the exiting employee whether he or she understands that using the customer list to “solicit” new business with a new employer is not allowed. Although many employees understand that they are permitted to “announce” their departure to customers, the interviewer should ensure that the departing employee understands the difference between a professional announcement and a solicitation. In addition, he or she should be informed that downloading password protected customer information before leaving violates company policies.

The Exit Interview Can Prevent Ongoing or Future Harassment or Discrimination.
Finally, an interviewer should always ask an employee if she or she is leaving because of discrimination or harassment experienced on the job. Although many employers would rather not open the Pandora’s Box of a harassment or discrimination investigation, it is always better to be on notice before receiving a DFEH (in California) or EEOC complaint. If the answer is yes, this gives the employer many opportunities to appease the disgruntled employee before he or she retains counsel or initiates an expensive lawsuit in vengeance. Also, if an employee is leaving because of discrimination or harassment, the problem is often much larger than that one employee walking out the door and the “alleged harasser/discriminator” is still employed to wreak havoc on current employees. The Exit Interview answers can help prevent future lawsuits from current employees by bringing the alleged wrongdoer to the attention of the individuals in the organization that are in the position to help remedy the wrongdoing.

The bottom line is that disgruntled employees most often file lawsuits soon after they leave their former employer. The last, best effort a company has to proactively prevent a lawsuit is …the Exit Interview. So as not to leave you out there on your own…my own Exit Interview is available for download here: Sample Exit Interview*
*The samples are not intended to be "ready for use" by readers. In addition, they are not to be construed as legal advice. Rather, these forms are intended as samples and should be adapted to your particular company's needs. Although this work is copyrighted, you may freely use the content in creating or changing your own forms. I strongly encourage you to consult with a labor/employment attorney or contact me prior to using these forms within your company to ensure compliance.

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