Home > Uncategorized > Question For Businesses: How Can You Trust your Employees?

Question For Businesses: How Can You Trust your Employees?

I recently met with some business owner clients.  There is no simple way around it, they were in a serious mess.

 

Facts:

 

Clients own several businesses. They most recently purchased a business that had a lot of potential for growth. With the business, client assumed the employees of the business.  All signs were that all employees were on board with the change in ownership. My clients were excited to be running a new company and creating a friendly work culture.

 

After several months two key employees left and took with them several significant accounts that effectively turned the business upside down.

 

My clients were shocked.

 

They trusted the employees

 

What happened?

 

The clients knew that former employee had compiled a list of the business’ clients; surely there must be something they can do to stop him?
Unfortunately, at this point the clients are pretty limited in their legal remedies.
As an unpublished Michigan Court of Appeals decision from October held:
“A list of customers compiled by a former employee from personal and public sources available to that employee is not protectable as a trade secret…This is true even if the former employee has learned about the “peculiar needs of particular clients” from his employment.”  Indus Control Repair, Inc v McBroom Elec Co, Inc, No. 302240, 2013 WL 5576336 (Mich Ct App October 10, 2013)

 

There are certain rights that business owners have under the Michigan Uniform Trade Secrets Act, but customer lists compiled from personal sources was not one of them, and this is exactly what the employee took.

 

At this point, unless there was evidence that proprietary/confidential information was taken, my clients are left with protecting their remaining business by having all remaining key persons enter into “non-competition, non-solicitation, non-disclosure agreements.”

 

As the Court of appeals indicated regarding customer lists compiled from a public source,  although such information may be protectable by a non-competition agreement, such information is a not a trade secret.” Id.

 

Lesson:

 

Although you can do things to give your key employees incentives to remain faithful to your company, sometimes you can get duped. My clients are trusting people, and they wanted to see and believe the best in people. When they purchased this business having their employees enter into non-competes did not even cross their minds.

 

However, entering into written contacts that are reasonable in how they protect your legitimate business interest is  best practice. It also provides clear communication of what conduct is expected of employees. If you have such agreements in place and they have been clearly communicated to your employees, you will be in the best position to trust them.

 

Questions? Comments?

 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

 

 

 

 

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