Written by Michael Arnold
While it seems like it happened forever ago, it was just back in July when LeBron James once again held this nation captive over where he would play basketball. Four years ago, he jumped ship to Miami to join forces with Dwayne Wade and Chris Bosh, which led to two championships and four straight finals appearances. (Note: one championship really since San Antonio lost 2013’s championship; Miami, and LeBron specifically, didn’t “win”). Now the King has decided to return home to form the new “Big 3” with the promising (yet oft-injured) young superstars, Kyrie Irving and Kevin Love. With his latest “decision,” LeBron almost instantaneously went from one of the most loathed people in the world to one of the most liked. Redemption is an amazing thing. Last time he left, he pretty much did everything the wrong way; but this time was a different story.
LeBron’s departure from and return to Cleveland has some decent parallels to the non-compete world that are worth exploring.
Employee departures can leave emotions running high on both sides, especially when the talent exiting or entering the door was or will be critical to the success of your organization. As we blogged about this summer, employers on both sides should take steps to minimize the risk of litigation in this situation.
More specifically, employers can blunt a departure’s impact by having their employees execute clearly-worded, reasonably-tailored restrictive covenant agreements at the beginning of or during employment to make it less likely they will jump ship to a competitor immediately after their separation, and if they do jump ship, that they won’t take the employer’s customers, clients and employees and confidential information in the process. Among other steps, employers should also be prepared to promptly cut off the departing employee’s access to internal databases and customer lists and require them to return, and confirm in writing that they have returned, all company documents, devices, data, and other property in their possession. They should also have protocols in place to formulate and deliver a message about the departure to the internal organization and to the market (including their customers and clients) as necessary and in a timely manner. And employers should be thinking through these issues well before an employee walks out the door so they are not caught off guard and can maintain their competitive edge. I cannot stress this point enough.
If Cleveland in 2010 and Miami in 2014 had truly thought through the possibility of LeBron’s departure while he was still on those teams, they may have been better-positioned to compete after he left. Thinking through these issues in advance may have meant Cleveland owner Dan Gilbert spending a little dough to surround LBJ with enough talent so he wouldn’t leave. Instead of that, we got Gilbert’s infamous panic-stricken “Letter” written in comic sans font impugning LeBron’s integrity after he left. In 2014, the case was no different for Pat Riley, Miami’s President. Did he not see LBJ’s potential departure coming? Was he really not willing to pay a little luxury tax to keep the team intact? Did he really think adding depth meant Michael Beasley and Greg Oden? And, most importantly, did he realize that questioning LeBron’s resilience at a post-Finals press conference was an extraordinarily hypocritical move given that he sold LeBron on a “you’ll never win with your current Cleveland teammates” sales pitch just a few years back? If he had addressed these issues properly, there’s a chance the Heat would not just be another team in the East this season.
On the other side of the coin, an employer welcoming a competitor’s employee into their organization should not turn a blind eye to the competitor’s potential reaction. The former employer will want to know whether their former employee absconded with any of their confidential information and plans to solicit their customers, clients and employees in violation of their non-compete obligations, if any. And if they suspect that is the case, then a costly lawsuit may be on the horizon, not just against the employee, but also against the new employer.
Thus, well before the actual hiring decision, the new employer should ask itself some basic questions; for starters: does this potential hire have a non-compete agreement and if so, what does it permit and prevent him or her from doing? And how can we work around that agreement? What risks are we taking if we move forward with the hire, and how, if at all, will we stand behind the new hire if a lawsuit is threatened? Further, what steps should we take to make sure that the new hire doesn’t have and later disclose any of his former employer’s confidential information, and doesn’t solicit their customers and clients for the restricted period of time? And the list goes on…
When you take the time to ask yourself these questions and provide (honest) answers to them rather than rushing through with the hire, then you are far less likely to face a lawsuit and/or have a court prohibit the new hire from working for you. Similarly, if Miami and LeBron had thought through these issues in 2010, they would have likely opted against a nationally-televised “Decision” and the subsequent “Not 2, Not 3, Not 4 …” after party, which turned them into villains for the next four years. Cleveland, and especially Dan Gilbert, seems to have thought through some of these issues this time around. Mr. Gilbert stayed mostly muted during Decision 2.0, speaking only after LeBron went public with his decision. There was no huge press conference, no big celebration – just an indication from LeBron and the organization that they are looking forward to bringing that longed-for championship to Cleveland once and for all.
Getting this right is not easy, but it is critical given the potential impact of the departure on both sides. Preparation and proper execution of exit and hiring plans are key. We strongly recommend that you consult with your trusted employment counsel to help walk you through these issues. Doing so can make all the difference to your bottom line when you lose or take on new talent.
Tomorrow: Part 4 of 11: Chris Pratt and Unexpected Surprises in Hollywood and the World of California Employment Law. For previous parts, click here.