Leaving employer to create competitor – tips and pitfalls
February 6, 2014 12:12 PM   Subscribe

A colleague and I are considering forming our own company in competition with our employer. We're currently researching our idea and working up a full business plan. How do we do this legally and ethically, and avoid getting fired until we're ready to jump?

A colleague and I are considering forming our own company in competition with our current employer. While we put together our detailed business plan and investigate whether it's truly a good idea to jump ship, what should we do to make sure we do this in a smart way?

We want to protect ourselves form getting fired until we leave and from the risk of legal action afterwards, and do it all as ethically as possible. We both like our immediate boss and know he'll take this personally; we won't be able to avoid that but want to minimise his pain.

Relevant facts:

1. We both work for a big company and the project is a start-up subsidiary.
2. We will only do this if the GM of the subsidiary agrees to come with us and plan to put the idea to him on an upcoming visit – we think there's a good chance he'll go for it and if not we don't think he would expose us, both because we have a close relationship with him and can't see what he would gain.
3. If the GM agrees we would want to poach a few staff from the subsidiary but wouldn't say anything to them or anyone else until we had completely worked up the business plan and were close to handing in our resignations. These staff wouldn't be critical to the plan but would help a lot.
4. The project is now being run by someone else apart from one sub-project that I have oversight of. This means that we can hand over our responsibilities on this project and focus on others, which helps with avoiding a conflict of interest. I would continue to work on the sub-project and do that properly – I'd make sure they couldn't accuse me of sabotaging it.
5. We would, however, use this time to find out useful information from other people in the company and collect helpful materials.
6. The reason we're considering this is the project is being taken over by someone who doesn't really know what she's doing but is closer to our CEO, and as a result it's going in a very different direction from the one we believe in (as the people closest to it). As our company has turned down the chance to work with our strategy, we don't feel that we're holding back on sharing something that we've developed on company time/money. From now on we wouldn't share our ideas but we are no longer in charge of strategy. We could make suggestions if we wanted to but I don't think we have a moral obligation to do so.

To avoid raising suspicion and creating a paper trail we've set some ground rules:

1. No corridor conversations – only talk about it off-site or in meeting rooms.
2. No using company computers or texting on company phones.
3. We are printing out useful documents that we have created ourselves but only one or two a day and they could all be used in our jobs.
4. Only ask colleagues research questions that could we could plausibly ask anyway.

My specific questions are:

1. What potential legal action could our current employer take against us? We are in the UK and the sub is in Asia. We will be adopting a similar business model and while there are some elements that are somewhat different to our competitors (elements that the current employer doesn't seem too interested in right now, except for the sub-project that I'm leading) I don't think there's any intellectual property that someone could protect, such as a patentable process.

2. What should we be doing to protect ourselves now against any legal action – both now and after we resign (if we do)?

3. Any tips on how to avoid getting found out and losing our jobs?

4. Any advice on when to jump? We'd like to maximise our time with salaries and progress our business plan to a stage that we felt confident enough to go, but there will come a point when it's too risky to stay, e.g. we couldn't start negotiating with suppliers.

5. Has anyone else done this before and how did it go?

6. Any tips to improve our chances of success?
posted by anonymous to Work & Money (16 answers total) 2 users marked this as a favorite
3. We are printing out useful documents that we have created ourselves

Wait, wait, wait, wait.

Work you do for your employer is owned by your employer. Taking documents you created for your employer is theft. Period. Do not continue.
posted by saeculorum at 12:18 PM on February 6, 2014 [16 favorites]

Yeah, saeculorum is right. I have testified in cases where the employer was suing the people who started the new company about computer forensic examinations that showed the theft of documents. Don't do it.
posted by procrastination at 12:22 PM on February 6, 2014

It's not really as black and white as what Saec up there says, knowledge you've gained by working for your employer is yours, but yes, be extremely careful about actual documents you've prepared.

That being said, did you sign a Non-Compete? Is it enforceable in the UK and/or where your Asian subsidiary would be located? Your current employers may not be able to stop you outright, but they could generate a lot of legal expenses at a time when you're going to be thin on capital.

Are you planning on using the same suppliers are your current employer? I'd assume they're still going to be a much larger customer, be careful you don't get your door shut in your face because they don't want to lose their larger account.
posted by Oktober at 12:24 PM on February 6, 2014 [1 favorite]

When you started working there did you sign any sort of non-disclosure / non-compete / non-solicitation agreement? Do you have a company handbook? Do you have an employment contract? I'm willing to bet any one of those things have pretty specific statements about exactly this.
posted by magnetsphere at 12:28 PM on February 6, 2014 [2 favorites]

Your first question has a simple answer: You need to talk to a lawyer pretty much immediately. In addition to things that are outright theft (printing out documents your employer owns), everything you're discussing here is basically exactly what non-compete agreements exist for. Even if you didn't sign one, even doing this successfully is going to involve serious legal attention to detail.
posted by Tomorrowful at 12:29 PM on February 6, 2014 [2 favorites]

You are an agent of your employee as long as you work there. Agency laws may prevent you from taking any steps to compete with your employer until you no longer work for it; there are duties of loyalty and so forth that could subject you to liability. You need to consult an attorney, not the Internet.
posted by jayder at 12:31 PM on February 6, 2014

Depending on how your company structures its contracts the GM may have a non-compete bonus that is paid X number of months after leaving the company. The ability to enforce non-compete clauses is variable by jurisdiction (a chat with a lawyer at bar in that location can advise you). However, a non-compete bonus can be a pretty powerful incentive to stay. Why jump ship if you can't take another company's offer for 12 or 24 months? Don't assume the GM will come with you. Assume he will blow the whistle on you no matter how much he likes you.

Best advice - ask a lawyer for advice. A big company has big pockets and a big legal team. Be sure this is the fight you want.
posted by 26.2 at 12:33 PM on February 6, 2014

I am just a random internet person but 2 and 3 are where you make big assumptions.

Based just on what you wrote, GM stands to lose/gain a lot by keeping quiet if he doesn't want to jump on board with you. Staying silent screws HIM. The GM will know you're going to want to poach his employees. He'll see you have no loyalty to your company and you'll have no problem going after his talent.

Then he'll protect his relationship with your employer by outing your plans to them. He won't want to look like he was aware of all of this and did nothing. That'd ruin his stable job and career plans.

That's just one way to see it based on what you wrote here. Get a lawyer and good luck.

2. We will only do this if the GM of the subsidiary agrees to come with us and plan to put the idea to him on an upcoming visit – we think there's a good chance he'll go for it and if not we don't think he would expose us, both because we have a close relationship with him and can't see what he would gain.
3. If the GM agrees we would want to poach a few staff from the subsidiary but wouldn't say anything to them or anyone else until we had completely worked up the business plan and were close to handing in our resignations. These staff wouldn't be critical to the plan but would help a lot.

posted by vincele at 1:27 PM on February 6, 2014 [1 favorite]

So to make sure my above answer responds to your questions: to improve chances of success, remove the GM from your plans and get a lawyer.
posted by vincele at 1:29 PM on February 6, 2014

You shouldn't discuss this at work at all. Period. The problem with a "long con" is that you can become too comfortable and you out yourself without ever realizing you're doing it. And about the GM, never confuse true friendship with a good working relationship. If he doesn't want to join you, there's a good chance he will speak up. But yeah, this is all complicated legally and you are going to need a lawyer before you do anything you can't take back.
posted by Aranquis at 1:57 PM on February 6, 2014

I'd suggest you rethink whether you are ready to go into business on your own.

You certainly seem up for the risk, but too much so.

You are exposing yourself to a lot of obvious risk, which you seem to understand on some level, but at the same time, you seem to be oblivious to the extent.

Moreover, you show little or no understanding of how important trust and reputation are in business. Covering your ass legally is something you need to do up front, but legalities are a refuge of last resort.
posted by Good Brain at 2:03 PM on February 6, 2014 [1 favorite]

I'd talk to an intellectual property lawyer who can tell you what ideas are yours and what aren't. The documents sure aren't. We all know that most people take info from their employers anyway, but you may not know if your employer can TELL if you've taken info or not. If you're planning to go into direct competition with your former employer, expect them to be ripping mad about it. Maybe you're no threat to them, but don't expect that to matter. They'd do the forensic research immediately, I'd think. If they actually did make a point of trying to protect secrets and you signed something promising you'd protect them, at least in the U.S., you'll have a committed a trade secret violation. I've talked to a lawyer who would gleefully use that to hammer you into the ground, especially if the company did their due diligence to protect their secrets.

Now, where I certainly have no knowledge is how enforceable non-disclosure, non-compete, and confidentiality agreements are when you set up shop in another country. If your HQ is still in the UK, though, expect your former employer to use their substantial legal resources to try to squash you and your non-existent legal war-chest. If you're setting up outside England I think it also probably is hugely important WHICH Asian country you set up in. Some of them are probably much more friendly to the UK than other when it comes to enforcing business agreements and patents and the like.

In summary, talk to a lawyer or two or three (may an IP specialist, a business agreements expert, and someone who specializes in the laws of your desired Asian country). As others have said, I'd be wary of even talking to your GM. Even if you're the best of friends, he has no obligation not to rat you out if not doing so will cost him his career. Personally, I'm not a fan of non-compete clauses in general, but people sign them knowing what they're getting into. I think you're treading on thin ice here, and I'd go get some substantial legal advice before you take another step.
posted by KinoAndHermes at 3:02 PM on February 6, 2014 [1 favorite]

Seconding Good Brain, this is a lot of risk and it seems like a good deal of the success of your plan hinges on poaching from your current employer. Your question sounds like you have enough work experience to realize that you could go into business for yourself, but not enough relational job experience to recognize that a great deal of what goes into a business' stability are communications and relationships.

To start off, though, to succeed on your own, you need to count on only yourselves, and do all the work in your free time. Not at your employer's office. Not by "collecting helpful materials" (sorry, that's stealing if you can't find them elsewhere) and not by printing out documents you have worked on in your offices. It all needs to be done on your personal time, with your personal equipment, from materials you could find anywhere.

If you do not have the equipment, free time, or motivation to do that, then your business has already failed.

I would be very surprised indeed if your GM said nothing about it to no one. GM likely got their position because they built up a strong network. I don't see anything in your question that shows what they could gain from going along with your plan, and loads that they could lose (their network, namely). There is nothing stopping them from nodding politely at your suggestion, smiling, saying "I'll think about it", and then touching base with people they know (privately, without your knowledge) and telling them, "you are never going to believe what anonymous is up to."

As for the key part: to genuinely maximize your chances of success, you also need to take a long, hard look at the importance of relationships and trust when doing business. It's a gaping hole in your plan, and one that's rather common with younger, more inexperienced workers. If you think I'm silly for pointing it out, then you are officially internet-diagnosed with young'un syndrome. Seriously though. Relationships are important. This is what people mean when they say don't burn bridges, and more colloquially, don't shit where you eat.

Others have made some pretty good points about the legal aspects as well.
posted by fraula at 3:53 PM on February 6, 2014 [6 favorites]

You should talk to a lawyer in your jurisdiction. Questions to ask are: "What does my employment contract mean when it says XYZ?" "What is the law on non-competition here?" "What is the law on intellectual property / work product / creative property?" "If I do my legwork here, is it document theft?"
posted by mibo at 5:38 PM on February 6, 2014

Following up on what Fraula and I said: talking to an attorney is necessary, but it is by no means sufficient. Attorneys specialize in helping their clients navigate legal risks, and, in the process, end up exposing their clients to other important risks. For example, all the horribly one-sided contracts lawyers draw up for their clients, apparently oblivious to the fact that if the other party reads it closely, they will recognize how one sided it is and feel like they are contemplating doing business with someone who is going to screw them six ways over, thus squandering all the trust that was built to that point.

Talking to an attorney is about 10% of this.
posted by Good Brain at 12:28 AM on February 7, 2014

If your goal is to do this ethically, your first step should be to stop collecting a salary from your current employer. Taking their money while you use your time to plot how best to poach employees and business plans and set up a competing business is not something that can be done "as ethically as possible."
posted by alms at 8:27 PM on February 7, 2014 [1 favorite]

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