Negligent Supervision & Hiring

Posted on October 18, 2011 by Rob Radcliff

 

The Case

FINRA recently fined Merrill Lynch $1 million over a Texas Ponzi scheme.  The case, which involved a San Antonio broker who was sentenced to prison was covered in a recent blog post in the Stockbroker Fraud blog. 

The Merrill broker persuaded investors to put money into a partnership and used at one point $1.4 million of those funds for personal spending and to support his house-flipping business.  FINRA alleged that Merrill failed to properly supervise the broker and failed to monitor the accounts that were used to operate the Ponzi scheme. 

The Cause of Action

Texas employers will always have to be aware of a potential cause of action against them for the wrongful or negligent acts of their employees.  The negligent hiring/negligent supervision is a catch-all claim where the Plaintiff alleges that the employer either (1) improperly screened the potential employee during the hiring process; or (2) failed to properly supervise the actions of the employee. 

The latter is very difficult to defend in terms of obtaining a summary judgment because there is always the argument that the employer could have done something a little bit more to prevent some type of damage to the plaintiff.  That said, strong pre-employment screening policies and supervision policies mitigate against these type of claims. 

 

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Stealing the Competition's Employees

Posted on June 20, 2011 by Rob Radcliff

   

In a recent article about employee poaching Mark Hendricks profiled the common practice of poaching a competitor's talent.  In the article he noted:

  1. Employers like to hire people who are employed, not unemployed; 
  2. Reaching potential hires through social networking tools like LinkedIn has made poaching easier; and
  3. Potential employers need to worry about non-solicitation agreements, non-compete agreements and other confidentiality provisions a poached employee may have signed. 

My thoughts:

           

  1. Do your due diligence in determining what post-employment covenants a potential hire may have -this may impact whether you want to make the hire;
  2. Make the employee certify in writing that there are no post-employment covenants that would affect their future employment;
  3. Make it clear that if the case turns out that there are post-employment covenants, the employer may terminate the employee and not necessarily defend them in any type of lawsuit;
  4. Make  new employees certify that they have not taken any confidential or proprietary information that belongs to their former employer; and
  5. Remember – what goes around, comes around.
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Protecting your business from an employee departure - the IT response.

Posted on September 20, 2010 by Rob Radcliff
                                         
 
 
 
Assume a scenario where you star salesperson tells you he/she is quitting or you are about to fire a subpar employee.  The employee may or may not have a non-compete or non-solicit.  The employee regularly has access to proprietary information.  This includes customer contact information, customer pricing information, and confidential internal pricing information.  What do you do in terms of protecting that information?
 
  • Email - Does the company monitor employee email - probably not.  As distasteful as it may sound someone in HR or someone on the business side may need to examine the substance of the employee's emails (from the company email address).  How far back? Depends on the situation.  The employee's  emails need to be scrubbed to determine if they are offloading or have offloaded proprietary information to competitors or personal email accounts for future use.  Further, the IT department needs to maintain and preserve the email account but end the employee's access to the account either immediately or upon some agreed time.


  • The network - Most employees are not going to email company information to a competitor or even a personal email account - some still do though.  The delivery device of choice is the thumb drive.  It's small, cheap, and can hold a lot of information.  I'm no IT expert but many IT folks can determine what type of downloading an employee has been up to including the use of zip drives or thumb drives.  How far back should the company go?  As far as necessary to obtain some "comfort" level.  

 

  • Beyond email and the network - Many companies have proprietary databases where customer/client information is maintained.  In one non-compete case a client was able to show that the former employee had dumped the entire database (through printing) the night before they were fired.  Can you do the same?  Many databases require an additional log in and indicate the when, what and where of the employee access.  Was there a middle of the night access prior to quitting or strange access from home? Find out.
 
These are of course a start - not a comprehensive list.  An IT policy for exiting employees is a must. The employee is naturally going to take what they have developed or worked on during their tenure. But, that "information" may not belong to them.  The company needs a standard operating procedure for handling the departure - an ad hoc response will not suffice.  That former employee will be your competitor.  

 

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Social Media Screening (Potential Hires): Part 1

Posted on August 23, 2010 by Rob Radcliff

                    

Social media sites can give an employer/recruiter information about potential hires that you can't ask in an interview.  Take Facebook for instance, you can learn the following about me from my profile and posts:

  • Race/Ethnicity - just take a look at my picture;
  • Age - set forth in my profile;
  • Marital Status - set forth in my profile;
  • Children - take a look at my pictures; and
  • All the other information you can glean from pictures, status updates, etc.

The point is, there is an endless amount of information out there - much of which you cannot consider when making the decision to hire someone.  However, there is information that is not protected. 

What if there was a Facebook status update where the candidate stated they were fired from their last job for filing false reimbursement reports or the fact they have a non-compete agreement with their former employer?  These could be legitimate reasons not to hire someone.

So why shouldn't you incorporate social media searches as part of your company's hiring process?  A few reasons:

  1. A lawsuit over discriminatory hiring practices will almost certainly delve into whether social media screening is used as part of the hiring process;
  2. A Plaintiff could always allege, whether true or not, that information obtained from social media was used in the decision not to hire them;
  3. How do you document you didn't use something - hard to prove a negative;
  4. It's not possible to unlearn information obtained from social media - like the pregnancy status of a potential employee; and
  5. Is it really even worth it considering the potential liability that could arise?

It's always easy to say no.  Next week I'll examine the other side of the coin.  The short of it is, there is no right or wrong answer and each company's conclusion will depend on what information they are looking for and how they implement such a process.  There is no one size fits all answer.

 

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