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HR Roundtable Minimize Your Losses


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Minimize your Losses: Prevent ing Theft of
Customers, Ideas, Money and Time

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HR Roundtable Minimize Your Losses

  1. 1. Brought to you by The TemPositions Group of Companies • MiNiMize your Losses: PreveNTiNg ThefT of CusToMers, ideas, MoNey aNd TiMe By Anne DeAcetis Many employees abide by their agree- and crafting the right agreements and Theft of physical and intellectual ments with employers in good faith. But policies, employers can do much to property every new hire represents a risk of some reduce their risk. Companies suffer when employees form of loss. There are many things Devora L. Lindeman, Esq. visited take property, money, computers, sup- employees can steal: confidential infor- TemPositions’ HR Roundtable Se- plies, product (or even product compo- mation, customers, product, money and ries on December 10, 2009 to offer nents) from the workplace. And loss of even time. A worker who leaves may try her guidance. Lindeman has 13 years intellectual property—trade secrets, to recruit former colleagues, essentially of experience in employment law client lists, proprietary processes, for- stealing employees. In the face of these and is Senior Counsel at Greenwald mulas, blueprints, etc.—can harm the risks, companies must have strategies Doherty LLP, a firm that represents company for years to come. for minimizing losses and recovering management exclusively in this area. The first thing companies must do, from them lawfully. Lindeman lectures and publishes Lindeman stressed, is make reasonable The FBI calls employee theft the widely on the subject of employment effort to safeguard their property. If “fastest growing crime” in the US. The law and is a regular contributor to information is truly sensitive, it must be American Society of Employers offers kept out of general circulation. Courts sobering statistics: businesses lose 20% Per Lindeman, understanding how may rule that information does not have of their income to theft and fraud; 20% losses occur (and how to prevent them) protection if it is too widely accessible, of employees are aware that it is tak- is a timely priority. Employee turnover so access should be granted on a strict ing place (though they usually do not is much higher than it was in the past, “need to know” basis. intervene); 44% of employees believe especially among sales staff. Access If tangible property is valuable, it their employers could be doing more to to computers and company databases should also be accessed by fewer people. reduce losses; and 55% of all offend- makes theft of information quick and Cash is better safeguarded by de-cen- ers are managers—people the company easy. And more and more employees tralizing authority; separate signatures trusts the most. belong to social networking sites, which should be necessary to write checks or access petty cash. Such checks and balances limit the opportunities workers The FBI calls employee theft the “ fastest growing crime” have to steal. in the US. The US Chamber of Commerce estimates that Non-compete agreements employee theft costs companies from $20 to $40 billion Non-compete agreements have many per year. components. Most restrict employees from going directly to work for a com- petitor. They prohibit former workers The US Chamber of Commerce esti- notoriously tempt users to take unof- from contacting clients and taking trade mates that employee theft costs compa- ficial breaks from work—stealing time secrets or other information. They state nies from $20 to $40 billion per year. from companies that are paying for it. that whatever a worker produces will And the consequences are real—when Lindeman specializes in “preventa- remain the property of the company, companies fail, employee theft is the tive maintenance,” helping ensure that and there’s usually a clause prohibiting cause one third of the time. companies’ written policies (from hand- employees from recruiting their peers. Many companies assume that if they books to employee agreements) protect Surprisingly, many companies don’t have basic non-compete agreements on them adequately. At the HR Roundtable, have non-compete agreements on file file, they’re protected from information she stressed the importance of custom- for much of their workforce. They then theft. They may also believe that losses izing agreements based on the needs of have no recourse when former em- from property theft can be recovered each business and each role. “If a policy ployees start their own enterprises or by withholding wages (they can’t). The is non-specific,” she warned, “it will be share proprietary information with new good news is that by anticipating losses non-enforceable.” employers.
  2. 2. Those that do have non-compete (Non-compete agreements in New property. The company is free to dictate agreements sometimes make them so York are somewhat unusual. Employees how, when and why employees use broad in scope that they’re unenforce- must abide by them if they quit a job or them. They are entitled to monitor use able. Courts weigh a worker’s ability to are terminated for cause. But if a com- of their property, within limits. (Com- make a living against risk to companies, pany eliminates a position or otherwise panies must stop reading or listening to so it’s critical that non-compete agree- lays off an employee, New York State anything that is clearly personal, and ments be clear—and fair. may no longer consider the agreement may not use monitoring systems to learn Lindeman recommended crafting binding.) personal passwords.) They’re empow- agreements to be reasonable in terms of avoiding lawsuits—a view from the ered to discipline workers for abuses, up three factors: geography, duration and other side of non-compete agreements to termination. scope. Restrictions should always be Again, Lindeman urged specificity. based on what employees actually do, Companies tend to focus on non-com- Policies should state that during the what information or technology they pete agreements for their own employ- workday, employees are expected to have access to, and how likely it is that ees. But they may neglect to protect work, and that excessive personal use of sharing their knowledge would harm the themselves from being named in non- computers is a theft of company time. It company. compete suits filed by competitors. should be made clear that computers are for work-related use only. There should be clear limits on personal email and Surprisingly, many companies don’t have non-compete the Internet. Employees should have no expectation of privacy, even during agreements on file for much of their workforce. Those that breaks. And lastly, determinations of do have non-compete agreements sometimes make them “abuse” should ultimately be left up to so broad in scope that they’re unenforceable. the company (to protect against unfore- seen behaviors). For companies that don’t have (or If a company is regional, there’s no want) such a stringent image, policies reason to restrict employees from work- Employers should ask candidates if can be relaxed. Most employers don’t ing for competitors in other markets. they are bound by prior agreements want to interfere with brief, necessary Companies can’t expect workers to as part of the interview process. They communications (e.g., checking on leave the industry; a timeframe of 18 should also instruct all new hires not children). But most workers have per- months is acceptable. (If keeping an em- to share confidential information from sonal cell phones. Smart phones enable ployee away from competitors is vitally prior employers. The employee should employees to access personal email to important, Lindeman recommended sign a statement confirming they are not take care of urgent needs. In some ways, “garden leave,” a paid severance period.) bound by prior agreements and agreeing it is more reasonable than ever to restrict Companies also reach too far when they that they will not share any information. company equipment use, with flexibility try to restrict employees from taking Existing agreements must be carefully at the company’s discretion. on different roles for competitors or in reviewed. Based on the reasonableness Employees may see these restrictions related industries. of geography, duration and scope, the as burdensome, but lifting them again Again, Lindeman stressed, the value new employer may find that the candi- involves risk. Even employees who think of a non-compete agreement is in the date is not in violation. Or, they may they’re being careful can put company details. If an agreement is full of restric- discover that making an offer poses a systems (and data) in danger. Down- tions that are irrelevant to a worker’s business risk. If there’s any question, loads can contain malicious software. daily activities, courts will tend to Lindeman advised, the company should The simple act of visiting certain web believe the worker’s account of the consult an attorney with employment sites can trigger downloads of adware, employment relationship. If an agree- law expertise. which can interfere with computer ment only addresses employees’ actions Protecting computer systems processes. after they leave, they could legally start Computers may be used to violate dis- Employees routinely use workplace competitive ventures while they’re crimination or harassment policies. An computers for personal use, and employ- employed. employee may forward messages that ers today are often frustrated by how Lindeman also recommended apply- they find funny, which others may find much time their workers spend surfing ing agreements mindfully. All employ- offensive. If the messages are sent on a the web, shopping, visiting social net- ees should sign confidentiality agree- company system, the company risks the working sites and working on personal ments. Employees who have personal perception that it condones the conduct. projects. Especially on breaks and dur- relationships with the company’s clients Social media sites pose their own ing lunch hours, employees feel entitled should sign non-solicitation agreements, dangers, because they make private to use company computer systems for which prevent employees from taking thoughts very public. It’s frustrating such activities. clients to their new companies. And enough when employees spend exces- But employment law regarding only key parties should sign non-com- sive time on these sites. But employees computer use mirrors the law on tele- pete agreements. who “tweet” negatively about their phone use. These systems are company
  3. 3. work, or post status updates that reveal from making any negative or unprofes- ing HR with simple, direct questions. too much about their companies’ busi- sional impression, online or off. More Would the company rehire the worker? ness, represent the company poorly and casual businesses may be far more Is there is anything else a new employer may offend clients as well as colleagues. permissive. should know? It’s worth noting that not all online Again, she recommended reasonable- If a past employer is overly evasive activity is harmful. Some businesses en- ness. What does the company need to but the hire still moves forward, Linde- courage employees to maintain private, know? How likely is it that outside-of- man recommended typing a memo professional blogs—this enables the work activities would harm the com- about the attempt to check the reference company to make the claim that their pany? Employees are more likely to and including it in the employee’s file. employees are thought leaders. Others respect guidelines that aren’t unneces- This due diligence (evidence of having specifically assign employees to promote sarily intrusive into their personal lives. tried to vet the employee) provides some the company using social networking. protection against charges of negligent Policies for these employees should hiring, which can be brought if the new reflect these permissions. Employment law hire harms other employees. If policies are not already in place, Lindeman noted, employers can still regarding computer When the worst happens: how to dis- cipline employees who steal take action against offending employees use mirrors the law on Lindeman recommended quick, clean by focusing on their performance. (If an telephone use. These termination once professional trust employee is online for much of the day, it’s likely that their work does not meet systems are company is broken. But she acknowledged that professional standards.) Poor perfor- property. The company is many companies have close relation- mance, whatever the cause, is always a ships with employees and may be will- justifiable reason to discipline or termi- free to dictate how, when ing to take extenuating circumstances nate an employee. and why employees use into account. An otherwise excellent worker who shows true remorse may be Monitoring outside-of-work activities them. disciplined rather than terminated. It’s It’s now relatively easy to track em- ultimately the company’s decision. ployee activities using company-owned If a company is unsure what to do, technology (computers, cell phones, Until there are more laws on the books, Lindeman recommended considering PDAs and even GPS-equipped vehicles). companies should choose the approach how harmful the theft was, the likeli- And there are many laws that support that makes sense for their business, hood that the employee will steal again, a company’s right to monitor activities striking a balance between professional and the potential harm to the company. while employees are working. But there obligations and personal privacy. What is the worker’s complete history? are few laws governing companies’ right How valuable are they? Would taking to use these technologies to track behav- using hiring practices to minimize simple precautions, like limiting ac- ior outside of work. losses cess to property or data, prevent future Some monitoring may be appropriate. With so much at risk, hiring good losses? If a company restricts use of company people is an essential starting point for Even terminations can be negoti- cars on weekends, for example, they minimizing losses. No system will catch ated to be more or less punitive. A can discover that workers are violating every dishonest employee. But there are worker can be asked to resign, or can be that policy by noting cars’ movements many concrete measures employers can “permitted to resign” (a clear red flag on Saturdays and Sundays. (Lindeman take to ensure that they’re hiring honest, to future HR personnel). If the loss is noted that it’s always polite, though professional and trustworthy people. significant, a company may well want not required, to inform employees that Lindeman recommended multiple to fire an employee. But Lindeman monitoring will take place.) interviews with different parties within counseled against making an example But many personal online activities the company, spreading responsibil- of a worker by broadcasting the reason fall into a legal grey area. HR may not ity for each hiring decision. As a rule, they’re leaving. (Charges of defamation approve of saucy pictures on a personal companies should always check refer- are usually not worth the risk, except web site or expletive-laden blog posts. ences, confirm degrees, call previous under carefully scripted circumstances.) But New York State in particular is employers to verify job experience, and When employees are terminated, they protective of workers. Companies may run third-party background checks. All should not be left alone with their com- reach too far if they make hiring deci- this should take place before an offer puter systems. They may be tempted to sions based on legal outside-of-work is made. (It is much more complicated access and copy/email proprietary infor- activities (however distasteful) that they to terminate an employee once they’ve mation—or even delete their work. discover online. been hired.) Lindeman recommended taking a Lindeman noted that policies vary Sometimes previous employers resist “digital snapshot” of the worker’s hard based on company tastes. An employer sharing details. This may be a bad drive (before anyone else uses it). This with a business-like image will favor sign. But it can also be simple company can be invaluable if the employee tries stricter policies, prohibiting workers policy. Lindeman recommended engag- to fight termination. A principal in
  4. 4. HERE POSTAGE PLACE employment law called “after acquired made independent of the worker’s will- of the largest staffing companies in the evidence” gives broad support to ter- ingness to repay.) New York tri-state area with operations in minations if companies discover more In general, Lindeman recommended California, has been helping businesses infractions (also punishable by termina- moving on—unless losses are substan- with their short- and long-term staffing tion) after a worker leaves. tial and have the potential to harm the needs since 1962. Visit them online at And while employees are encouraged company long-term. If the employer or email them at to give two weeks’ notice, employers are wants to pursue the matter, the courts not obligated to keep them on staff dur- are the appropriate forum. And it’s ing that time. Depending on the worker, important, she stressed, to be consistent. it may be safer to thank them for their By handling all losses the same way, service and ask them to leave the office companies protect themselves from as soon as they’ve gathered their things. charges of discrimination. recovering losses The process of avoiding, dealing with and recovering from loss can be compli- Once losses are discovered, com- cated and take valuable hours away from panies have to decide if, and how, to a company’s core business. But by being recover what was stolen (or its value). diligent in the hiring process, drafting Some companies carry theft insurance, detailed agreements and embracing a 420 Lexington Avenue, New York, NY but these policies often require a police firm, common-sense approach, compa- (212) 490-7400 report, and many companies are not nies can do much to reduce their risk of 111 Broadway, New York, NY interested in making a workplace spec- loss—and act decisively when losses do (212) 689-2444 tacle out of a loss. occur. 20 Broadhollow Road, Melville, NY Employers can’t deduct from wages to Anne DeAcetis is a freelance writer (631) 673-7100 recoup losses, though they can withhold outstanding expense report reimburse- based in New York. Reach her at 10 Mott Avenue, Norwalk, CT ments. They also can’t threaten employ- (203) 945-2099 ees with criminal charges in order to The HR Roundtable is a breakfast forum 118-21 Queens Blvd., Forest Hills, NY coerce payment. (A company that de- (718) 544-3100 for human resources professionals in New cides to involve the police should inform York City sponsored by The TemPositions 140 Geary St., San Francisco, CA the employee, but the decision must be Group of Companies. TemPositions, one (415) 392-5856