When an employee crosses the line—by misusing confidential information, soliciting clients, or quietly launching a competing business—the pressure to act swiftly can be intense. But in these moments, speed without strategy can do more harm than good. Making the wrong call can be unnecessarily expensive, lead to weakened or waived legal claims, or result in reputational fallout. So, how do you make the right call?
A recent webinar walked through real-world scenarios that illustrated how companies can protect themselves by following a four-step, structured, strategic approach. Whether you're in-house counsel, HR leadership, or a business executive, the same four steps apply. Below, we outline the four essential steps every legal and HR team should take before escalating a response, and how these steps play out in practice.
Step 1: Assess Business Impact
Before taking action, ask: What's at stake for the business?
Is the misconduct threatening key client relationships, disrupting operations, or undermining leadership? Or is the impact more limited—perhaps reputational or internal?
Scenario Insight:
In one case, a company learned that a senior executive was secretly running a competing business while still drawing a full salary. The business impact was significant: the executive had access to strategy, clients, and confidential data. Because the risk was high, the company acted—but only after carefully planning its response. That discipline preserved leverage and protected client relationships.
Step 2: Evaluate Legal Risk
Next, determine whether the conduct creates meaningful legal exposure or if the claims are more theoretical than actionable.
- Are there enforceable agreements in place?
- Does the conduct violate trade secret laws or fiduciary duties?
- Is there a clear breach of contract?
Scenario Insight:
A healthcare provider filed a lawsuit against a former employee for allegedly misusing patient data. But the data was outdated and anonymized, and the legal claims didn't hold up. The result? A costly, public misstep that could have been avoided with a more thorough legal risk assessment.
Step 3: Confirm Evidence Strength
Even if the business and legal risks are high, you need evidence to support your claims. Without it, escalation can backfire.
- What proof do you have?
- Are you relying on assumptions or verified facts?
- Have you preserved digital evidence or conducted interviews?
Scenario Insight:
A company preparing for a major acquisition lost its target team to a competitor. They filed suit quickly, but failed to investigate the employees involved or preserve key evidence. The legal theory was strong, but the lack of evidence weakened their position and increased costs.
Step 4: Preserve Leverage
Finally, consider how your response will affect your ability to control the situation.
- Will your actions become public?
- Are you prepared for retaliation?
- Can you preserve relationships with clients or employees?
Scenario Insight:
In a high-stakes case involving a departing CEO, the company had little initial evidence and limited legal options due to jurisdiction. But by acting quickly and negotiating access to devices, they recovered deleted data and shifted the balance. Their early restraint preserved leverage and ultimately led to a favorable outcome.
Key Takeaways for Legal and HR Teams
- Start with the business reality. Understand the operational, financial, and reputational stakes before deciding how to respond.
- Ground your approach in enforceable rights. Not all misconduct is legally actionable—identify what the law protects.
- Build your case before you act. Gather facts, preserve digital evidence, and confirm the strength of your position.
- Think beyond the immediate response. Consider how your actions affect future options, relationships, and public perception.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
