Improved Economy May Prompt Increased Employee Defection Rates

by: Nichole Gunn February 22, 2011

Aside from the growing concern business owners have that they will begin to lose top talent as the economy improves, there is another concern companies need to watch out: employee defection.

With an economy that improves and offers more opportunities, some cunning employees may become deceptive and decide to venture out on their own, using skills and information they acquired from you. Incomplete contracts can be a breading ground for breaches of confidentiality.

Employees striking up their own business will take learned skills, procedures, tools, and trade secrets with them, while leaving employee loyalty at the door.

One company, Standard Medical Supply, is facing this very problem. Founder of the company, Tony Ferrante hired three employees from a rival company. After two years they left to start a competing business. Ferrante has filed suit against the former employees for making unfair use of the company's pricing strategies.

"We're seeing more of those inquiries," explains said Christopher Stief, chairman of law firm Fisher & Phillips L.L.P.'s employee defection and trade secrets practice group, who is not involved in the Standard Medical case. "It does give me the sense that the economy is improving in that companies may be hiring and they may be willing to invest in some higher-risk hires."

To help ward off employee defections, companies need to establish effective employee retention programs, along with comprehensive loyalty programs. These strategies will foster employee satisfaction. They will also provide an environment wherein employees are encouraged and willing to contribute ideas and procedures to help the company move forward.


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