Three Steps Every Business Should Take to Prepare for A Key Employee’s Departure

It is inevitable that a company will lose a key employee at some point in the future. The corporate world today can be very fluid with employees moving from company to company several times during their career. Unfortunately, when a key employee leaves the company, the departure can cause several issues for the company. If the management team does not have a plan in place to address losing a key employee, it can disrupt business and place the company at risk.

Step One: Plan for the Inevitable

From small companies to large corporations, management teams must have detailed plans in place for the departure of a key employee. Crucial roles in the company need to be identified with a detailed job description. It is impossible to replace a key employee if you are not aware of the exact role the employee played in the company. Another benefit of developing detailed descriptions for key employees is it can reduce an employee from claiming to be a partner or having an interest in the company.

With that in mind, employees who have critical jobs should provide regular updates to employers regarding the status of their ongoing projects. If an employee leaves suddenly without notice, the employer has an updated status report so that another employee can continue the work without interruption. Key employees should also maintain a detailed list of vendors, customers, and other contacts they utilize while performing their job.

Step Two: Protecting Company Secrets and Confidential Information

Unfortunately, only trade secrets can be protected in common law when an employee leaves the company. Therefore, key employees should have written contracts that prohibit the employee from disclosing any information about the company or the employee’s job.

A business attorney with experience handling these matters should draft the company’s employment contracts. Contracts that are too broad, include information generally available to the public or others in the industry, or do not have the required elements of an enforceable employment contract could be void and unenforceable when the employee leaves the company.

In addition to protecting company secrets, it is important to include other clauses in the employment contract that protects the company’s interests including:

• Non-compete clause to prevent a key employee from actively competing for business within a certain area for a certain period after leaving or being terminated.
• A garden leave clause allows an employer to terminate employment but requires the employee to wait until the notice period has ended before taking another job.
• Post-termination restrictive covenants to prevent employees from working with customers, suppliers, vendors, or hiring the company’s employees for a certain period.
• PILON (payment in lieu of notice) clauses allow companies to legally terminate an employee while retaining the protections in an employment contract.

A business lawyer can help companies draft employment contracts that are tailored to the industry and the needs of the company. Comprehensive employment contracts are one way a company can protect its interests if a key employee must be terminated or leaves the company.

Step Three: IT Issues and Physical Protection

Depending on the company, it could be prudent to change the locks or have new keys cut when an employee leaves or is terminated. Management should maintain a detailed list of company property in an employee’s possession (i.e. cell phones, keys, parking passes, computers, backup discs, USB keys, etc.) to ensure that company property is returned immediately.

If an employee leaves or is terminated, management should immediately analyze the employee’s access to all company data to develop a mitigation plan to limit potential damage. Some of the steps a company must take to protect data and accounts include:

• Change all passwords for networks and workstations.
• Deactivate remote access accounts.
• Change passwords to email, voice mail, and all online accounts.
• Set up a process to monitor email and online accounts for unauthorized access.
• Change physical badge and biometric access to exclude the employee.
• Change PINs for credit cards, gas cards, and other accounts.
• Remove access and authorizations from financial accounts, including credit cards, bank accounts, etc.
• Do not forget to remove access to Cloud accounts and social media accounts.
• Revoke access and change passwords for the company website.
• Send a written notice to customers, vendors, suppliers, and other companies and individuals notifying them of the employee’s departure and providing contact information for the person who will now serve as their contact with the company.

In some cases, a company may want to consult an IT specialist or a corporate security firm to ensure the company’s data is protected. This step may be necessary if the employee who is leaving is the company’s only IT person, has sole access to crucial accounts, or the person has the only administrative passwords for the company.

Whether it be a question of entity formation/dissolution or a partner dispute, Matthew Fornaro has long demonstrated the record and pedigree needed to assure your business interests remain on the right side of the law. He practices in Coral Springs, Parkland, and Broward County, Florida. To arrange for a consultation, simply fill out the contact form located here.