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HR Roundtable Minimize Your Losses
1. Brought to you by The TemPositions Group of Companies • www.tempositions.com
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 www.humanresoursesIQ.com. 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. 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. 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. 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 www.tempositions.com or email them at
to give two weeks’ notice, employers are wants to pursue the matter, the courts info@tempositions.com.
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- anne.deacetis@gmail.com. (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