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Congratulations!
You are going to start your own company! Before you do, you have to leave your
current employment. Below is a checklist of things to do - and not do - before
you leave.
Employee Rights.
Do make sure that you receive what is due you when your employment ends. You
must be completely paid for the services you provided within 72 hours of the
end of employment. If you are not fully paid within 72 hours, you can seek
redress from the California Labor Commission - including a day's pay for each
day after the 72 hours that you remain unpaid, up to 30 days.
Severance Pay.
Check your employees' manual to see if you qualify for severance pay,
particularly if the end of your employment is not voluntary. You can negotiate
for severance pay if you are terminated involuntarily, even if your company
does not have a severance policy.
Retirement.
Arrange for any 401(k) plan, IRA, or other retirement-type plan. Does it need
to be rolled over? Check with your financial advisor. Also, if you have been
granted stock options, check with your financial advisor about their value and
the conditions under which you should exercise the options.
Health Coverage.
If you qualify for COBRA health care coverage, you must be provided with the
information necessary to make it possible for you to choose COBRA coverage
within 45 days. If you are starting your own company, COBRA may be more
affordable than seeking independent coverage for a small company.
Trade Secrets.
Make sure that when you leave, you do not leave with any of your soon-to-be
former employer's trade secrets. Purge your computer and personal files of
correspondence and files that contain information valuable to your employer. If
often makes sense to do so with the assistance of your employer - it reduces
the suspicions that you are stealing from them. Many start-ups have suffered
early deaths when former employers sue them for theft of trade secrets, because
of suspicions (or plain paranoia) of former employers. By the time the issue is
resolved, the start up has incurred huge legal debts, discouraging angel
investors and venture capitalists. Moreover, the legal process hijacks huge
amounts of time that could have been used developing the start up's service.
Customer lists, secret recipes, manufacturing processes, and the like can all
be an employer's protectable trade secrets.
However, many
things are not trade secrets. If you have met customers, and can find them
easily again (such as through the Yellow Pages or Internet) without referring
to the employer's list, the identity of that customer is not a trade secret.
Further, your experience in the industry is yours, not the employer's:
"Equity has no power to compel a man who changes employers to wipe clean
the slate of his memory." Avocado Sales Co. v. Wyse, 122 Cal.App. 627, 634
(1932).
If you were just an employee, your former employer cannot prevent you from
competing with it. Even if you signed a "Covenant Not to Compete,"
California courts will not enforce it if you were just an employee. However,
many other states will enforce a covenant not to compete. Seek good legal
advice. Checking with an attorney before you leave is likely to be far more
cost-efficient than when you get sued.
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