Question: Hi, Alan. I am Rena from Malaysia. I need your help on a question about a conflict of interest.

I previously held a high position in an organization. While working there, I noticed that one of the services provided by the organization was not provided well to customers. So, I established another organization under my husband’s and dad’s name. Some of the customers switched over to the new organization I established.

I have left my previous employer, and some of the customers who moved over to my new organization are still using my new organization’s services. My previous employer is upset, and is threatening me.

My question: Is the present situation a conflict of interest, and can my previous employer sue me for this? I am in a state of confusion. Please advise.

Reena
Ipoh, Perak, Malaysia

Answer: Dear Reena: Many people find the subject of “conflicts of interest” to be confusing. Though I am not licensed to practice law in Malaysia, I can do my best to explain basic concepts and offer you some relief from your confusion:

1. While employed, employees owe a duty of “loyalty” to their employers. A central part of the employment relation is the duty of an employee to be “loyal” to his or her employer. That “loyalty” is not absolute, but has some limit: after all, the employee is not a slave. But one part of that required “loyalty” is that an employee is not supposed to act in competition with his or her employer while employed. Working “for” an employer and, at the same time, working “against” the employer is the clearest “conflict of interest” I can imagine. After all “Which side are you on?” Imagine what you would think if you heard a soldier was fighting for his army, and at the same time he or she was fighting against his own army; sure would seem wrong, wouldn’t it?

2. However, the moment the employment relation ends, the now-former employee is free to compete with the now-former employer. The very moment that an employment relation ends – for whatever reason it may end – the employee becomes free to engage in direct competition with his or her employer, provided that the employee has not signed a non-compete agreement. For more information on non-compete agreements, simply [ click here ].

3. But, an employee who has violated a “duty of loyalty” can be sued for any (i) damages during employment, and (ii) damages that were experienced even after the employment. This is what gets most people confused.

Imagine if a person is driving a car and runs over another person on a bicycle, who suffers a broken leg. The bicyclist can sue the driver of the car for that broken leg. Imagine that, as a result, the bicyclist is out of work for 10 months and has lost income for that 10-month period. The driver is responsible for (a) his bad driving while on the road, and (b) the damages for the broken leg (on the day of the accident) and for the lost income (that occurred later.) In the same way, an employee is responsible for (a) his disloyalty that took place during employment, and (b) the employer’s lost income in the future, whenever it takes place.

4. It is for these reasons that addressing a conflict of interest at work – by getting permission while you are employed – is often the wisest course of action. Disclosure and consent is the way to get around the restrictions imposed by the employee’s loyalty duty. Employees who either (a) find themselves in a conflict of interest at work, or (b) would like to compete with their employer, usually in some “incidental” or “inconsequential” way, are often best served by addressing the situation with their employers, and gaining permission to engage in the conflicting activity. “Sunshine is the best disinfectant.”

If you are interested in obtaining a Model Letter entitled “Addressing a Conflict of Interest at Work,” simply [ click here ].

So, Reena, your competition with your employer could result in a lawsuit against you, and the damages in that lawsuit for years to come. I would suggest that you contact a local lawyer to assess the situation, and to be prepared in case you are, indeed, sued. Sorry I don’t have better news for you, but I believe it is the truth that you really want.

I hope this information is helpful. Thanks for writing in from Malaysia.

My Best,
Al Sklover

P.S.: Want a Blog of Your Own? Develop an “Internet Presence” of your own. It’s a fun, challenging, and rewarding thing to do. And it might even help you get a new or better job. We can help you. Just [ click here. ]

© 2012 Alan L. Sklover, All Rights Reserved.

“To keep your secret is wisdom;but to expect others to keep it is folly.”

- Samuel Johnson

ACTUAL CASE HISTORIES*: Rena consulted our firm with an unusual question: “Am I permitted to share my employer’s confidential information with my attorney in order to get legal advice?” Rena’s question was interesting, but the reason she asked it was more interesting.

As Corporate Controller, Rena was responsible for direct supervision of all accounting and financial functions of her corporate employer. She was also part of a team that created and implemented policies and procedures to identify, resolve and document accounting issues. One day, Rena came upon an email that made her believe that her employer was using an improper accounting treatment regarding payments made to overseas Consultants. She did some internal research, and then raised her concern with the Office of the General Counsel (that is, her employer’s chief lawyer.)

For the first time in Rena’s six years with the company, she noticed that she was being left out of meetings, isolated from others she usually worked with, and denied information necessary to do her job. Soon after that, her direct supervisor accused her of “sloppiness in thinking,” without any specifics or explanation. She felt what was happening to her violated her employer’s anti-retaliation policy. And so she retained an attorney to help her resolve the problem. She showed her attorney the email in question, and her employer’s anti-retaliation policy, and, too, internal reports of payments made to the Consultants.

As often happens, Rena’s attorney wrote to her company’s General Counsel, and in his letter quoted the email, the anti-retaliation policy, and the internal reports. The next day – without warning – Rena was fired and escorted out of the building for “gross misconduct,” identified as her sharing with her lawyer the company’s secrets, which he had inadvertently confirmed in his own letter to the company. It was characterized as a breach of the Company’s Confidentiality policy which forbids “sharing or divulging any Confidential Information with any person outside the Company.” For a Corporate Controller, this was a devastating career blow. It also resulted in Rena’s loss of all of her stock options, any bonus for the present fiscal year, and even the right to collect Unemployment Benefits. Ouch!

Rena was aghast and perplexed; her attorney was irate. Rena came to us for a second opinion.

Rena was not happy about what we told her. Her attorney was even more upset.

LESSON TO LEARN: Employers have a legitimate need and a legal right to make sure that their “confidential information” is kept secret, because confidential information about a company that gets out can be used by its competitors to help them compete against it. The many types of “Confidential Information” are almost limitless, and can include information (as well as documentation) about a company’s (a) customers, (b) strategic plans, (c) formulas, (d) unique business methods, (e) employees, (f) vendors, and (g) finances, just to name a few. Efforts to maintain confidentiality are entirely proper, provided however that the efforts, the information and the manner of enforcement are, themselves, proper.

“Confidential Information” does not include (i) information that is publicly available, such as the location of a company’s offices, or (ii) information that the company, itself, has disseminated outside the company, such as statements included in advertisements. Nor does “confidential information” include (iii) information with no value, such as the fact that the company employs both women and men.

Many employers require that their employees sign a written Confidentiality Agreement. Some employers have written Confidentiality Policies in their Employee Handbooks. Whether or not Confidentiality Agreements have been signed, or written Confidentiality Policies have been disseminated, the law views all employees as having a duty of confidentially as one part of all employees’ larger duty of loyalty to their employers.

Here is a common Confidentiality provision:

“The Employee promises to maintain strict confidentiality of the Employer’s Confidential Information, both during and after his or her employment. Confidential Information means information about the Employer, its business, and its customers, customer prospects, vendors, other employees and investors which is not generally known outside Employer, which Employee learns of in connection with his or her employment by the Employer, and which might prove advantageous to the Employer’s competitors. Confidential Information includes: “(1) Employer’s business plans, policies and finances; (2) Employer’s financial projections, including without limitation as to annual sales forecasts, computations and marketing plans; (3) customized software, marketing techniques, production methods; and (4) identity of former, present and targeted customers, vendors, investors and employees.”

When reading that Confidentiality provision, did you notice any exception for sharing confidential information or documentation with your attorney? Of course not, because none exists. It is for this simple reason that an employee’s sharing confidential information or documentation with his or her attorney is a violation of required Confidentiality, and thus could be considered gross misconduct worthy of immediate firing for “cause,” as happened to Rena.

“But,” you might say, “How can I get necessary legal advice on employment-related issues if I can’t share confidential information and documentation with my attorney?” The answer is: You need to be able to do that, and it is fine to do that, but neither you nor your attorney should ever admit that you have done that, and the law says that is OK.

You see, everything you share with your attorney, and your attorney shares with you, is “privileged and confidential,” and neither you nor your attorney should ever disclose what it was that was shared between you and him or her. That includes spoken communications, written communications and digital communications, and sharing of documents, too. This rule of “privilege” is an absolute one, and an important one, and one that many people don’t keep in the forefront of their minds.

The Lesson to take away is this:

“It is a violation of your confidentiality obligations to your employer for you to share with your attorney information or documentation that is confidential. However, if you do share such information or documentation with your attorney, neither you nor your attorney should ever admit that you have done so, because the law protects all attorney-client communications, even if you are under oath. In response to any question about this, just say, “I don’t share what I discussed with my Legal Counsel.”

Sadly, it was Rena’s attorney who “spilled the beans” – or, more accurately, disclosed what should have been held in confidence between Rena and him – in his letter to her employer’s General Counsel. That error was most fundamental – and damaging – and totally unnecessary.

WHAT YOU CAN DO: When obtaining legal counsel on employment matters, bear this lesson in mind, and it might be wise to remind your attorney of it, as well. Here are some other pointers to assist you in this process:

Continue Reading. . .

“I saw an angel in the marble and carved until I set him free”

- Michelangelo

Ah, the splendor of productive passion. At work and elsewhere, if you find an idea, a mystery, an opportunity, or even a chunk of marble that is pregnant with promise, pursue it with all you have. Before you know it, just like Michelangelo, you will be in the company of angels.

© 2012 Alan L. Sklover. All Rights Reserved

To All our Friends Who Celebrate Easter:

The Essential Message Of Easter is Hope.

Is there any better Message to Celebrate?

Happy Easter!

© 2012 Alan L. Sklover. All Rights Reserved

Question: Alan: I recently read one of your blog posts entitled “Avoid the Obsolete Job Trap,” and it got me to thinking. As a veteran solo business lawyer based in Fairfield County, Connecticut, I was wondering if you could please elucidate for me your recommendation on new legal niches . . .and further resources I can seek out on what you mean by “water law” and “selling digital content on the internet.”

Steve
Stamford, Connecticut

Answer: Steve: Your question is a great one – in fact one that nearly everyone these days has on their mind, to one degree or another. I am no expert, but I am fascinated with “what is going on” in this respect. Here are my thoughts:

1. For a variety of reasons, on a worldwide basis, it seems to be getting increasingly difficult to make a living. I am not the only person who believes that it seems to be getting harder to locate and maintain a secure livelihood. It’s the same in every business, every profession and every income level. Looking at countries all over the world, it doesn’t seem to be too much better anywhere you look. Perhaps it is the globalization of the world economy, perhaps it is computers and other machines replacing personal service, perhaps it is the effects of the internet, perhaps it is the last gasps of a possibly outdated economic order . . .I am not sure. But it surely does seem to me that people from Cairo to Chicago, and from Greece to Greenwich, and from Pakistan to Peoria are having a harder time locating and maintaining a secure livelihood with which to feed, house and educate their families. Whether this is a temporary or long-term phenomenon, we still all have to deal with it in the present.

2. Notice that large organizations of every kind often miss emerging trends and new opportunities. In every segment of every society, social organizations tend over time to grow and grow, often just for the sake of growth, even when there is no need for that growth. By “social organizations” I mean corporations, universities, charities, media companies, health care organizations, professional firms, and even religious organizations. And when they grow, they have a tendency to become increasingly impersonal, cumbersome and slow to adapt. Their large budgets require they appeal to large audiences, not small constituencies. It is everyone’s experience: it is very rare that you get personalized, specialized, or made-to-order goods or services from most large organizations. Instead, you must choose between “Press Button One for Pharmacy, Press Button Two for Ladies Goods,” or “Item 8 on the Menu.” They must appeal to the thousands of customers, not the few, and therefore must limit themselves to offering only products and services that will sell to millions of people, not the a dozen or two.

3. But the “problems” and “weaknesses” of others can be your “opportunities” and “advantages.” It is simply amazing how one’s perspective can change one’s life. While some people see and bemoan the problems of the world, others see the problems of the world as their own challenges, their own opportunities, and their own potential advantages. Problem: kids are not learning math. Opportunity: if you work in the education field, open up a tutoring service, or suggest your employer do so. Problem: people are increasingly unhappy about the level of chemicals in the public water they drink. Opportunity: consider opening up a water-testing, or filtering, company. Problem: your employer’s sales are going downhill. Opportunity: be the one and only person who takes the time and initiative to contact former customers to ask them why. Seeing the problems of others as your opportunities is a key to success in any field, because one way or the other, we all make a living satisfying the needs, wants and desires of others, and unfulfilled needs are where growth will take place.

4. For individuals and small groups of people, “niches” are an important career, professional and business strategy. Large organizations tend to miss the narrow and newer opportunities all around us, what is commonly referred to as “niche” opportunities. Whether in employment, the professions or small businesses, there is a valuable lesson here: look for human needs and desires that are not being satisfied by large institutions, and become either the person who does so, or the first and only employee in your company who does so.

Problem: Sadly, the incidence of autism is on the rise. Opportunity: If you are the only lawyer in your state who “specializes” in the legal rights of parents of autistic children, you will be busy and secure for a very long time. Likewise, if the neighborhood where your employer’s business is located is seeing the beginning of an influx of immigrants from a certain country, be the first to carry some of the goods and services desired by that new neighborhood demographic. Niche opportunities – for employees and for entrepreneurs – arise every single day, and they are all around us.

5. To locate valuable niche opportunities, start with demographic changes. Let’s say you are a real estate lawyer and because of the housing crisis and poor economy your real estate law practice is in the doldrums. No one is buying houses. No one is leasing new offices or stores. No one is building buildings. But think about it: Isn’t it true that more and more people are unmarried but living together? Isn’t it true that more and more young people who can’t find jobs are moving back in with their parents? Aren’t many seniors moving in with their adult children because they can’t afford nursing homes? Maybe you can develop a niche expertise in “agreements between co-habitators” to address division of responsibilities and liabilities Is it possible that compatible small businesses in hard times can “share” storefronts with each other? If you develop ideas and ways to take advantage of those “problems” of others, individuals, landlords and smaller business tenants may all love your services. If small businesses are having a hard time paying the rent, perhaps you could offer a service that negotiates lower rents from landlords for a percentage of the rent saved.

Once you have located and tested any one of these potential “niches,” it can become the centerpiece of a new, and perhaps revolutionary, “real estate law” practice. Write articles, offer seminars, start a website. You could be the first attorney in this new field of law, even the field’s “pioneer.”

By the way, I often refer to “water law,” as I see the scarcity, quality and availability of water to be growing human concern and a potential looming crisis, in which “experts” in the field – including attorneys – will be in significant and long-term demand. I have also noticed that “content” on websites and blogsites is becoming something of a tradable commodity, capable of being exploited by many different online businesses, but without for the moment any “brokers” who specialize in the field. These two “problems” seems especially ripe “niches” for investigation and possible development.

6. Sorry, I know of no real experts to consult; to locate and exploit “the riches of niches,” the best “guides” are an open mind, an adventurous spirit, and a willingness to take a risk. I have heard that there are centers of entrepreneurship, and even colleges that offer programs in becoming an entrepreneur. I rather doubt that there can be courses or programs to teach people how to locate and evaluate niche areas of employment, professions or businesses. Rather, I would suggest reading several magazines and newspapers each day, and consider what it is people are concerned about, what people are dissatisfied about, and what people want more of that they can’t seem to get. Then it’s just a matter of figuring out what you have within you – intelligence, compassion, creativity and discipline chief among them – that you can use to satisfy that human need or desire.

Finding and filling a niche in your workplace, in your profession or in your business field is a potential key to success in a world increasingly dominated with mega-stores, mega-hospitals, mega-donut shops, and mega-everything else. For employees, professional people, and small businesses, niche focus is a key strategy, and I recommend it without limit.

Thanks, Steve, for writing in. I hope this is of help to you.

Best,
Al Sklover

P.S.: If this has been helpful to you, consider making your next travel reservations through our blogsite’s EXPEDIA.COM advertisement. Their commissions to us help us to keep publishing.

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© 2012 Alan L. Sklover, All Rights Reserved.