A. 5 Things to Do When Your Competitor Hires Your Employees.

1. Move Fast. Unless a contract states otherwise, employers are not required to let a departing
employee work out a notice period. When an employee has announced an intention to compete, there
may be little advantage to having them stay for the duration of the notice period. Use caution to insure
you are not financing the employees transition to a competitor.

2. Conduct an Exit Interview. If you have reason to believe the employee will compete, an exit interview
may be even more important then usual.

Remind the employee of post-employment obligations concerning confidential or trade secret
information. Provide copies of any signed non-solicitation or confidentiality agreements. In the case of
former owners or those falling within Business & Professions Code section 16601 (Sale of Good Will),
discuss and confirm in writing the details of any non-compete obligations.

Inventory all returned company information and property, including copies of any original documents.
Advise the departing employee not to download, copy, transfer, forward, or manipulate company
information or data on any computer or other electronic device. Document an averment to that effect.
Determine a mechanism for the deletion of duplicate confidential information on home computers,
laptops, cell phones and PDAs.

As for a description of the employees new position, job duties, nature of business, and address and
phone number of the new employer. Be polite, the departing employee may not be obligated to give
you this information.

3. Investigate.
If a high value employee who poses a significant threat to the operation of the company leaves,
conduct an investigation to determine what information the employee may have taken or copied prior
to departing.

Conduct the investigation within the confines of the companys policies and procedures. Most
companies have polices that make clear that an employee does not have a right to privacy in any
company information, including emails, computer files, computer usage histories, voice mails, and the
like.

Consider immediately limiting or terminating the departing employees access to company offices and
information networks and equipment.
Absent a valid contractual provision preventing it, employees have a right to work for the competition.
While it is fair and appropriate for the company to protect its business confidential and proprietary
information, it should not unnecessarily offend a departing employee.

4. Be Careful What You Say, But Say a Lot. Be sure your customers know that service will not decline as a
result of the employees departure. Waiting to contact customers may compound the effect of a
departure. Dont bad mouth the departing employee but immediately notify customers that the
employee no longer has authority to act on behalf of your company. If you hear from customers or
prospects about an employee violating an employment obligation, take action quickly.

5. Prompt Legal Action.

If you determine that a former employee has acted wrongfully you have several options, including:

Send a Cease and Desist Demand Letter
File a Lawsuit
Seek a Temporary Restraining Order/Preliminary Injunction

A single employee taking customer lists or other information related to his former employers business
is a common cause for litigation. California law protects the rights of employees to sell their services in a
free marketplace, and protects employers against unfair competition and the misuse of proprietary,
confidential or trade secret information by competitors or former employees. While California law
makes clear that employees can lawfully prepare to compete against their current employer, it is less
clear when those lawful preparations cross over into a breach of the employees duty to his/her current
employer.

Claims against a former employee (and possibly their new employer) for misappropriation of trade
secrets must be brought within three years of the date a plaintiff has reason to suspect the factual basis
of a claim of misappropriation of trade secrets.

B. 5 Things to Know and Do When Hiring Your Competitors Employees.

1. Beware of team. When a manager, officer or employee of another company speaks on behalf of
other employees of that company, i.e., my team, my group, my office, he/she may be breaching a
fiduciary or other duty to their current employer. An officer breaches a fiduciary duty to his current
employer if he solicits his current employers employees to go to work for a competitor. In most cases,
these duties end when the employment ends. Barring the most unusual circumstances, an employee
does not breach any duty to his employer in discussing his or her own future plans for employment.

2. Determine whether employees-to-be are at-will or have a contract with their existing employer.
Make sure you understand any limitations on the employees ability to work for a competitor.
Enforceable restrictions can include a contract for a specified term. A company that interferes with
another companys employment contracts with its employees can be exposed to civil liability. Sellers of
good will or an equity interest in a company may also be prohibited from working for competitors.
California courts will also act to prevent a former employee from utilizing a former employers trade
secrets to the disadvantage of the former employer.

3. Make employment offers in writing. The offer should include a statement that the employee bring
nothing with them from any former employer and that everything they need to perform their job will be
provided by the new employer. Require the employee to represent and warrant that he or she is free to
accept the employment with your company and that he/she has not taken anything from his/her former
employer.

4. Employees who wish to follow. Recruit for open positions from multiple sources. Avoid targeting
only employees of a competitor. Advertise positions, get applications and resumes, interview and
conduct salary negotiations directly with individual applicants. Document all of these steps.

5. Announce the news. California law permits former employees of a company to announce that they
are no longer with their former company and are with a new place of business. In some circumstances,
however, an employee may be prohibited from soliciting customers of his former employer.
Announcements of employee acquisitions should bear this legal distinction in mind and should be
reviewed by legal counsel prior to making such arrangements.