How to Protect Your Business When Employees Leave

In honor of National Small Business Week, Doerner is pleased to show our support by sharing a series of insightful business tips for entrepreneurs and small businesses to help improve their business strategies. This article is written by Attorney Rebecca D. Bullard and it is the fourth of several articles in this series.

It is inevitable. You have an employee who tenders their resignation or is terminated. But you’re worried they might start their own business to compete with yours, steal your customers and employees, or use the information they learned during their employment for personal gain. What can you do?

Hopefully, you can rely on agreements the employee signed to restrict certain post-employment activities. To best protect yourself when employment ends, the groundwork needs to be laid when an employee is hired. In what are generally described as restrictive covenants, employers seek to restrict certain activities of employees both during and after employment. These types of agreements are not necessary for every employer, but if you think they would be useful for your business, you should include them in your new hire paperwork and make it a practice for incoming employees to sign. Oklahoma law has widely accepted that new (and sometimes continued) employment is sufficient consideration to bind employees to such agreements. (If you haven’t utilized these types of agreements, you may have another opportunity to get the employee to sign one in exchange for a severance payment, if you’re willing to offer it.)

So, what is it that you can and cannot get the employee to agree to, specifically? Unlike some other states, Oklahoma does not allow traditional non-compete agreements between an employer and an employee. Traditional non-compete agreements generally restrict an employee from competing with their former employer after the employment relationship ends (often by prohibiting them from engaging in a specified business or profession within a certain geographic area for a certain period of time). That type of broad agreement is off the table in our state.

Nonetheless, there are still ways to protect your business when employees depart. Oklahoma does allow two different kinds of non-solicitation agreements, which allow the former employee to work elsewhere (even for a competing business) but prohibit the employee from soliciting your customers or employees. Any such agreement still needs to be reasonable under the circumstances and should include a specific time limitation. What time period would be enforceable varies and depends largely on the specifics of your industry, business, and workforce. To avoid challenges, the duration should be the shortest time that you could survive while still accomplishing your business goals and protecting your business.

Regarding customers, Oklahoma law only permits an agreement that restricts former employees from directly soliciting your established customers for the sale of goods, services or a combination of goods and services. Agreements that attempt to restrict indirect solicitation (i.e., through others) and agreements that attempt to restrict solicitation of prospective customers will not be enforced.

Regarding employees, agreements may restrict former employees from any solicitation (direct or indirect, active or inactive) of your employees or independent contractors in an attempt to get them to work for someone else.

Another way to protect your business is through confidentiality agreements. Confidentiality agreements typically limit an employee’s ability to share information or knowledge about your business that they learned through their employment with your company. The information designated as confidential in the agreement often includes trade secrets, customer lists, systems or processes, and other proprietary business information that you make efforts to keep secret and would have value to others if it were released. The employee who signs such an agreement must maintain the confidentiality of your proprietary information and generally cannot share it with others both during and after their employment. Unlike other restrictive covenants, confidentiality agreements often contain no specific duration and continue to bind former employees from disclosing information as long as it is confidential.

If signed at the outset, these kinds of agreements serve to protect an employer and its interests when an employee’s employment ends for any reason. They can be a useful tool in limiting the former employee’s ability to unfairly compete with your business, even though Oklahoma does not permit traditional non-compete agreements.

Knowing these basics can help you protect your business interests and keep you from getting into legal hot water. When you want to prepare agreements for employees to sign or specific situations arise at termination, you need the help of competent and experienced attorneys. Doerner, Saunders, Daniel & Anderson offers full-service legal counsel to assist you with all your employment-related needs. For immediate assistance, contact Rebecca D. Bullard at rbullard@dsda.com or 918-591-5247.

Doerner, Saunders, Daniel & Anderson, LLP provides this content for informational purposes only. It is not intended to provide legal or other professional advice nor does the transmission of this information create an attorney-client relationship between any attorney of the Firm and the reader. If you seek legal advice or assistance, please consult with a competent attorney familiar with the applicable laws. If you wish to initiate possible representation by an attorney with this Firm, please call the attorney of your choice. You will be advised of our processes to avoid conflicts of interest and requirements of our letter of engagement before the commencement of representation.

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