Module 1: Employers and the Workplace and Employee’s Rights and Responsibilities When Leaving a Job

In the United States, employee turnover is common, and people leave their jobs for many reasons. An employee may leave the labor force entirely by retiring or can leave one position to pursue other endeavors. Since the Great Recession of 2008, labor market conditions have improved and stabilized in the ensuing economic recovery, and employees have become more comfortable with voluntarily leaving or changing positions in the workforce.

In this module, we approach the circumstances of employee turnover and when, how, and under what circumstances an employee leaves her job and how an employer can structure a work environment to reduce workover turnover. Furthermore, we address the employee responsibilities that persist even after she leaves her position. 

Who May Resign

Most American workers are employed on an at-will basis, meaning that they can leave their jobs at any time and for any reason. At-will employees are not legally obligated to provide employers with advanced notice or cause when they quit, although it is good form to provide employers with a dated, written resignation that includes the reason for the resignation.  It is also common practice to provide two weeks’ notice, where practical. This is an important professional courtesy that gives the employer an opportunity to hire a replacement and provides a worker with a record of the time and circumstances of the resignation.  

In contrast, contracted employees may be restricted from terminating their employment at will.  For example, if an employee signs a three-year employment contract, and after one year wishes to relocate, the employee could request to be released from the remainder of the contract. But, if the employer refuses, the employee is obligated, as a matter of contract law, to complete the contract.[1]

Constructive Discharge

When an employment relationship must come to an end, employers often prefer for employees to resign rather than firing them.  Companies face potential legal and financial responsibility when firing an employee, so circumstances may arise where an employer will try to compel an employee to resign.  A constructive discharge occurs if an employer makes working conditions so intolerable that a reasonable person would not be expected to have to deal with them.[2]  Constructive discharge may be grounds for a wrongful termination lawsuit, which we will discuss in a later module.

It’s often seen in a work environment where an employee feels threatened by co-workers based on habitual sexual harassment. However, for an atmosphere of sexual harassment or hostility to lead to constructive discharge, the offending behavior “must be sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment.”[3]  It’s a fact-specific determination and a plaintiff carries a heavy burden of persuasion.

The Workplace Environment

The quality of the workplace environment matters. Federal, state, and local laws establish basic guidelines and requirements for workplace conduct and personnel policies, but these laws also grant an employer with a great deal of flexibility. As such, an employer’s human resources department will want to provide all employees with policies designed to create pleasant working environments to boost worker morale and retention. Not only have organizational psychology studies demonstrated that creating pleasant working environments can substantially benefit operational efficiency, they’ve also shown that improving the quality of workplace environments can ultimately save money as employees stay at jobs longer.

          Another way for an employer to create a high-quality atmosphere is to push for employee privacy protections. During the hiring process, an employee will disclose personal information and during employment, an employer may require that an employee submit to background checks, polygraph tests and other scrutiny that may affect the employees’ privacy. While some of these practices are implemented for legitimate business practices, an employee does not completely relinquish her rights to privacy once she starts a job. There are Fourth Amendment rights against government infringement on privacy and laws such as the Fair Credit Reporting Act and the Health Insurance Portability and Accountability Act protect employees from unreasonable use of information in background checks and disclosures of private health information.[4]

Employers who set clear guidelines with policies and promote privacy can ensure positive emotions, well-being among their employees, can attract more talented employees, decrease labor turnover, and improve financial performance. Employees are less likely to quit their jobs when they feel valued, secure, and respected in the workplace and hiring new employees is costly for businesses, as replacing an employee who quits typically costs the employer about 20% of the employee’s salary.[5]

Still, even where best efforts are made to promote a positive work environment, some employee turnover is inevitable. Nonetheless, leaving a job doesn’t end an employee’s responsibilities.

 Ongoing Responsibilities After Quitting a Job

After the employment relationship is terminated, several of the legal rights and obligations continue to apply to both the employer and the employee. We’ll focus on the responsibilities of the employee.

 Trade Secrets

The law typically protects the confidentiality of trade secrets. After an employee leaves a job, she may not reveal the employer’s trade secrets or use them in a way that violate the intellectual property rights of the former employer. 

Trade secrets include a businesses’ private plans, devices, processes, tools, mechanisms, formulas and other information of a unique nature.  A trade secret may be a chemical compound for a new pharmaceutical drug, a privately-developed accounting system, marketing plans or a customer list.  However, for information to be protected as a trade secret, an employer must take affirmative steps to protect the information from disclosure, such as by password-protecting electronic documents or clearly labeling papers as confidential.[6]

Trade secrets can be particularly valuable in new and innovative industries.  As an abject example of the danger of employees leaving jobs with knowledge of trade secrets, consider the Waymo v. Uber case. Waymo, a self-driving vehicle company that formed as a spinoff of technology giant Google, sued Uber, which was also developing its own self-driving vehicle technologies to grow its ride-sharing business.  Waymo alleged that Uber had stolen Waymo’s trade secrets and intellectual property. The case revolved around Waymo’s former top engineer, who left the company to take a job with Uber in January 2016. 

Allegedly, the former Waymo employee downloaded confidential data about the company’s autonomous vehicle technologies just weeks before quitting his job and becoming the head of Uber’s self-driving car division.  Uber responded to the lawsuit by claiming it never had access to Waymo’s trade secrets and that merely hiring a former Uber employee is not an infringement on Waymo’s intellectual property.  Waymo asked the courts to stop Uber from moving forward with its self-driving vehicle business entirely because the company claims it is built on stolen proprietary information.[7] The case eventually settled in February of 2018.[8] 

The Waymo v. Uber case stands out as an example of how difficult and nuanced the protection of trade secrets can be.  The question of whether an employee disclosed protected, confidential information that he learned while working at a former job can be difficult to resolve. After all, an employee cannot help but apply his knowledge and experience to a new job, even if some of these skills were developed while the employee was working with proprietary trade secrets.  After leaving a job, workers should be cognizant of the ongoing liabilities associated with trade secrets and take care to not unintentionally disclose protected information.

Restrictive Covenants

Employees often agree to contractual provisions that limit their rights to engage in conduct that would be adversarial to their current or former employer’s business interests.  These agreements, known as “restrictive covenants,” may relate to the nature of the employer’s business, reasons for termination, or future business plans. Common types of restrictive covenants include confidentiality agreements, non-solicitation agreements, non-compete agreements, and non-disparagement clauses.

Some information is confidential by its very nature, and employees are prohibited from sharing it even in the absence of a signed confidentiality agreement, as in the case of trade secrets. Because trade secrets may be difficult to identify or enforce, many employers require employees to sign confidentiality agreements that cover much broader categories of information than trade secrets.  Confidentiality agreements prevent employees from sharing information that they learned of during their employment. Confidentiality agreements can be very broad in scope and subject the employee to liability for damages if breached.

A non-solicitation agreement is a restrictive covenant that restricts an employee’s ability to work with other employees or clients of the former employer. Non-solicitation agreements can also protect the employer’s intellectual property by prohibiting workers from starting their own businesses based on client lists and other information the employee learned during employment. Employers value non-solicitation agreements because they ensure that the work that was done to develop their business is not taken for use by a future competitor.

Non-compete agreements commonly accompany non-solicitation agreements.  Non-complete agreements restrict employees from working for their former employers’ competitors after leaving their jobs.  However, employers are limited in the degree to which they can restrict former employees’ job prospects.  While many employers require their workers to sign non-compete agreements, courts do not always enforce them because of the degree to which they restrict former employees’ freedom of contract. [9]  Courts will only enforce non-compete agreements if they are reasonable in three ways:

-       In the amount of time it purports to last for,

-       Its geographic scope, and

-       The scope of activity it purports to prohibit.

The Texas Supreme Court, for example, has stated that it will not enforce noncompete agreements that are “indefinite” in nature.[10]

Reasonableness in all these factors are fact-specific inquiries and vary from industry to industry and job to job. Suffice it to say that permanent or very long-term non-compete agreements or those that purport to stop people from working in industry anywhere in the United States, are extremely unlikely to be enforceable. Non-compete agreements that restrict employees from working in a narrow field in a specified city for a year or two are much more likely to be considered reasonable.

In fact, employers that require their workers to sign restrictive non-compete agreements must be careful to avoid potential liability for tortious interference with contractual relationships, which is a legal cause of action that arises when someone wrongfully interferes with contractual relations between parties.[11]  Trying to enforce an overly restrictive non-compete agreements to stop employees from contracting their work with other potential employers long after the employee leaves the job may form the basis of an unlawful interference claim.

One Nevada case that reached the state’s supreme court illustrates a non-compete agreement’s reasonableness analysis. In Jones v. Deeter, Deeter Lighting employed Larry Jones as an assistant in Deeter's lighting equipment supplier and lighting services business.[12] 

Deeter personally drafted a non-compete agreement, which Jones signed in addition to the employment contract. Pursuant to the terms of the agreement, Jones agreed not to compete with Deeter in the lighting retrofitting business for five years within a 100-mile radius of Reno, Nevada after the employment relationship terminated. As consideration for Jones's promise, Deeter agreed to pay him 50 cents per hour in addition to a $ 6.50 per hour wage. If Jones did compete by going to work with a competitor or starting his own lighting retrofit service business, the liquidated damages clause stated that Jones would pay Deeter $50,000.

 Deeter fired Jones three months after he started work. The next day, Jones began work as a salesman for one of Deeters’ competitors and Deeter sued to enforce the non-compete agreement. The Nevada Supreme Court ruled against it. The court reasoned, “After careful consideration of all the relevant factors, we conclude that the covenant is not reasonable. Although it appears that developing a customer base for the lighting retrofitting business is difficult, we nevertheless believe that a five-year duration is not reasonably necessary to protect Deeter's business and places too great a hardship on Jones. Therefore, the covenant is per se unreasonable and therefore, unenforceable.”

A non-disparagement clause is the fourth common restrictive covenant. This is a contractual agreement that limits a former employee from making public statements that negatively impact a former employer, its reputation, products, services, or employees after terminating the employment relationship.  A typical non-disparagement provision is straightforward: “Employee agrees that she will not disparage the Company or any of its officers, directors or employees. For purposes of this Section, “disparage” shall mean any negative statement, whether written or oral, about Company XYZ.”

What constitutes disparagement differs from court to court. In one Ohio case, an employer claimed that a former employee disparaged it by calling his old supervisor, the company’s executive director, a “slime bag.”[13] The court disagreed with the employer and found that this comment did not breach the agreement, characterizing it as a “trifling figure of speech”.

Like other restrictive covenants, the non-disparagement clause cannot be overbroad, or else it will violate Section 7 of the National Labor Relations Act, which provides an employee with the right to unionize, to join together to advance their interests as employees.[14] In one case, the U.S. Court of Appeals for the D.C. Circuit found that Quicken Loans’ non-disparagement provision in its Mortgage Banker Employment Agreement unreasonably burdened employees’ rights because it prohibited employees from publicly criticizing, ridiculing, disparaging or defaming the company or its products, services, policies, directors, officers, shareholders or employees. The court found the clause to be “a sweeping gag order” because it directly forbids them to express negative opinions about the company, its policies, and its leadership in almost any public forum.[15]

Professional Practices Related to Quitting a Job

Quitting a job can be a very stressful experience. But, as tempting as it may be times to quit a job in an abrupt and even disruptive manner, doing so may adversely impact professional relationships and future job prospects.  To preserve reputation, relationships, and future opportunities, employees may want to follow certain “best practices” when quitting their jobs.

Planning and forethought is key to smoothly transitioning out of a job.  First, two weeks’ notice of a pending departure is standard good business practice as it allows employers time to find a replacement and to deal with the transition. This is particularly true in jobs that require specialized skills or training, so employees in these fields may want to offer their employers even longer notice period. 

Second, an employee who is leaving her job should make sure that her supervisor is the first person to know she is leaving.  This may mean discussing it in a meeting, an email or a conversation with management, depending upon what is appropriate for the workplace environment.  Once an employer is notified that an employee is leaving, the employer and employee can work together to figure out the best way to efficiently transition the current employee out of the workplace. 

Finally, some employers request “exit interviews” in which employees are asked questions about their experiences working at the company when they leave their jobs.  Feedback offered during exit interviews should be constructive, and as this can be a good opportunity to help the employer improve the workplace.  However, workers who quit their jobs because they are unhappy with their employer may wish to refrain from too much venting of dissatisfaction to preserve professional relationships and future opportunities.[16]

References

Employers are under no obligation to provide references to former employees, and companies often have restrictive policies regarding what former managers can say if asked for a referral by a former employee.  Former employers may face potential liability if they supply incomplete, inaccurate or inappropriate information to other organizations.  Any policy regarding referrals must comply with applicable anti-discrimination laws, such as the Civil Rights Act or the Age Discrimination in Employment Act.  As a result, it is not uncommon for former employers to refuse to provide references.[17]

Where an employer gives a former employee a negative reference that is untrue and opens the former employee up to ridicule and public scorn, the employer may be liable for defamation.  In one case, a factory worker was fired after his coworker reported a threat he allegedly made to sabotage the equipment.  When providing the worker with written notice of his termination, his supervisor indicated that the reason for the firing was the worker’s threat to sabotage the equipment.  The termination notice was circulated to several other managers at the company. The worker sued his former company for libel and defamation based on the economic and reputation damage he suffered as a result of the publication of the notice. 

In this factory worker’s case, the jury awarded the former employee $15,000 in compensation for lost work and damage to his reputation and an additional $2,500 in punitive damages.  This case is a bit of an outlier, and the defendants successfully petitioned for a new trial based on procedural flaws.[18]  However, it does demonstrate that negative communication about employee performance may create civil liability, so employers should be careful when making public statements about former employees that could damage their reputations.

Conclusion 

Quitting a job can be a difficult decision, but almost all workers will do it at some point in their careers.  The average American worker stays in a job for less than five years before finding something new.  When quitting a job, workers should consider the conditions of their current and prospective workplaces.  If a workplace is hostile or otherwise unreasonably poor, an employee who leaves her job may be entitled to recover damages from her former employer on a theory of constructive discharge. From the employer’s side, fostering a positive work environment can decrease turnover and increased productivity. From the employee’s side, leaving a job in a manner that is considerate and sensitive to the needs of the employer can help the employee’s reputation and career in the long run.