Employees leave to start a competing company or go to work for a competitor because they think it is a better opportunity for them. Employees feel entitled to continue to work with customers with whom they have developed a relationship; and, they feel entitled to use company information, especially if they created it.

Here are some tips for departing employees to reduce the risk that their former employer will try to enforce a non-compete agreement and stop them.

Tip 1: Be aware of your non-compete.

Before you sign, it’s a good idea to have someone knowledgeable review the agreement to assess the scope and enforceability of post-termination restrictions. You may be able to negotiate revisions. If you’ve already signed a non-compete, you’ll want to be aware of what the document says so that you can assess how it may affect your future business plans.

Tip 2: Don’t use company time or resources.

An employee has a duty of loyalty to their employer. This means it’s usually OK to work on your new company on your own time (nights and weekends) but it’s not OK to work on the “newco” during the employer’s work time or using employer resources.

Tip 3: Exit carefully.

You want to carefully plan your transition. I encourage employees to leave on good terms, if possible. Sometimes the former employer can become a customer or potential business partner. If that’s not possible, plan your departure and transition carefully to avoid a direct violation of the non-compete and hence reduce your risk. Sometimes, departing employees position themselves to be “laid off” or “fired” or appear to be pursuing another activity.

Tip 4: Don’t take any company confidential information with you.

Do not take (or email) any company confidential information. Use a personal email account (not the company’s email system) for any communications related to your next business opportunity.

Tip 5: Keep a low profile (for a while).

Sometimes employers want to “set an example” to keep other employees in line, so it’s better to keep a low profile and slowly build your new business in a way that doesn’t provoke the former employer.

In conclusion, while it is legally acceptable for an employee to start up a new business while still an employee, it is not legally acceptable to do it on company time or with company resources. In addition, employees can reduce their risk by not directly soliciting customers of their current/former employer.

Good legal advice can help to achieve a smooth transition and reduce the risk of a legal battle.

Jean D. Sifleet, Esq., CPA
Business Attorney

120 South Meadow Road
Clinton, MA 01510 USA
t. 978-368-6104
f. 978-368-6105
c.508-361-0916

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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book.