When we think of workplace sabotage, a disgruntled employee sabotaging the company usually comes to mind. But sabotage can also happen at the partner level.
It is distressing, to say the least when your once-trusted partner is sabotaging the business you built together.
At one point you both were of common mind with a common vision looking to build a profitable business.
But now the relationship has soured to the point where your business partner’s actions amount to sabotage at work, and it has to stop immediately.
In this guide, we outline what corporate sabotage looks like and the options available to stop it.
If you have questions, contact the Texas business law attorneys at Massingill today.
What Does Business Sabotage Look Like?
We think of workplace sabotage as a clear and intentional act. However, some less obvious acts can also amount to sabotage. Therefore, we will outline both the less obvious acts as well as those clear intentional acts that equate to sabotage.
For whatever reason, perhaps through a build-up of tacit disagreements or maybe one big blow-up, your business partner’s enthusiasm is not what it used to be.
As a result, they may not show up to work on time, pay the business’s bills, or not return customer phone calls. Even worse, they could be too permissive in sharing confidential business information.
All of these actions can amount to less obvious forms of sabotage in the workplace. On the other side of the coin, are more clear acts of sabotage such as:
- Diverting business opportunities—giving company business to another person;
- Self-dealing—taking the business’s opportunities for themselves;
- Disparagement/Interference—speaking poorly of the business or disrupting a commercial relationship;
- Disclosure—intentionally disclosing company trade secrets, internal information, or intellectual property; and
- Violating contracts—breaching the terms of an employment, confidentiality, or non-compete contract, or the governing documents of the business (e.g., partnership agreement, operating agreement, shareholder agreement, bylaws, etc.).
The above represent the hallmarks of corporate sabotage and are not justifiable actions of a business partner under any circumstances.
Now that you have a clear idea of what constitutes business sabotage, what can you do?
Options to Stop Business Sabotage
To swiftly stop business sabotage, you must consider all of your options. Turning to the courts is the most obvious choice. But courts take time, and it may be too late once a court remedy is in place.
As such, let’s look at non-court options first, and after that, we’ll consider the court options. Finally, we will put the two together into a plan of action.
Contractual Options
Check to see if your business partner has any contractual obligations to you or the business. The terms of a contract often provide a remedy to business sabotage. Four common contracts could help:
- Employment contracts,
- Confidentiality contracts,
- Non-compete contracts, and
- The business’s governing documents.
Employment contracts set out the duties, performance standards, and obligations of an employee (note: your partner can be an employee of the business).
Confidentiality agreements impose duties of confidentiality and define confidential information. Non-compete agreements specifically outline what your business partner can and cannot do outside of the business.
All of these agreements will usually contain remedies—such as an injunction (i.e., a court order to stop) or liquidated damages (i.e., a fixed amount to be paid upon breach of the contract).
If any of these agreements are in place, the first step is to notify your business partner of the terms of those agreements that they are violating. Notification, in and of itself, can often stop the sabotage.
However, if the notice does not stop your partner’s behavior, then having a contract that your business partner is breaching can make your life easier in a civil action.
Lastly, while the business’s governing documents might have some of the above terms, more importantly, they may also have a buyout provision.
A buyout provision can put an end to sabotage because you can usually force your partner from the business through the buyout mechanism. This is often the most effective way to end corporate sabotage quickly.
Common Legal Options
If there are no contracts in place (including a buyout provision in the governing documents), then your options are likely limited to civil action remedies.
To that end, your business partner has two duties to the business: a duty of loyalty and fiduciary duty. All civil actions against your business partner for sabotage are based on these two duties.
A duty of loyalty means that the interests of the business come before your partner’s personal interests or the interests of their colleagues. Thus, if your partner diverts an opportunity to their child, it could be a breach of their duty of loyalty.
A fiduciary duty means that your business partner is required to perform their obligations and execute their duties with the utmost care and good faith. Thus, lackadaisical or careless behavior could be a breach of fiduciary duty.
As mentioned above, the civil causes of action are diversion, self-dealing, disparagement, or disclosure. They are grouped into three general categories:
- Tortious interference of contract—intentionally disrupting a commercial relationship;
- Conversion—stealing business property (e.g., secrets, money, etc.);
- Civil conspiracy—working with a third party to harm the business.
The remedies for civil actions can include injunctive relief, monetary damages, punitive damages (e.g., some statutes award triple damages), and attorney fees. However, all these remedies, except perhaps injunctive relief, take a lot of time, and therefore, the relief may be too late.
How We Can Help
You need to stop your partner’s sabotage at work immediately to prevent lasting damage to your business. Massingill understands the urgency of stopping workplace sabotage.
With our decades of business law experience, we have a third way to help. We can use both contractual obligations and civil legal remedies to bring the parties to the table.
At that point, it is our skill and experience as seasoned counselors at law that can open the parties to a settlement—right then and there.
These negotiations take a high degree of knowledge and nuanced understanding of business and the law and how they work together in practice.
Contact us to see how we can help save your business.
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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