Employee trade secret theft is a significant problem faced by many businesses. It is unfortunately all too common for a departing employee to take valuable confidential information from the former employer to the new workplace. An employer may use a number of legal strategies to stop the theft and misuse of its trade secrets by a former employee ranging from a cease and desist letter to restraining orders prohibiting the unlawful conduct. However, these legal strategies will be much more effective if the employer has established a standard set of practices to protect its trade secrets. These practices should cover all aspects of the employment relationship from beginning to end and should be consistently applied.
In the Beginning
Strong onboarding procedures provide businesses with the foundation for strong trade secret protections. Businesses should invest in drafting confidentiality and non-disclosure agreements that are unique to their business and should require all employees to sign those agreements at the start of employment. They should also bear in mind that a confidentiality policy stated within an employee handbook may not be sufficient. Noncompetition agreements can also prevent a departing employee from using the confidential information of its former employer at a new business. Similar to confidentiality agreements, noncompetition agreements should also be carefully drafted and tailored to each unique business to ensure the agreement will be enforced as needed. These agreements must also be provided to the employee before employment starts, preferably accompanying the initial written employment offer, to ensure enforceability.
When computers are issued at the beginning of employment, the employer should maintain inventory of what was issued and to whom. At this time all permissions and grants of access to the employer’s information should be carefully logged.
In the Middle
It’s in the middle of the relationship where many businesses fall short of protecting their confidential information. Once the employee is settled in and the typical fast pace of the business kicks in, it’s easy to forget the strategies necessary to protect the business from employee trade secret theft. At this time an employer should continue to keep inventory of any new devices issued to the employee, and also keep track of all access to confidential information granted to the employee. The employer should conduct routine audits of employee permissions and access to ensure those grants of permission remain commensurate with the employee’s job responsibilities. If an employee is promoted to a role where he or she will first have access to confidential information, the employer should consider whether a noncompetition agreement is now appropriate. If so, the employer should ensure sufficient consideration is provided to the employee in exchange for the agreement not to compete.
At the End
Employers should also follow a standard protocol when they learn the employment relationship will end. Businesses should monitor email traffic and computer access for unusual activity, issue a reminder of any confidentiality obligations to the departing employee, and use a standard checklist to ensure all of the employer’s property is returned. Remote workers should be provided with detailed instructions on how to return all of the employer’s information and electronic devices. Once this property is returned, before erasing a device and issuing it to a new employee, the business may want to consider holding onto the device to ensure any evidence of trade secret theft is preserved. This is particularly the case if the employer knows the employee is going to work for a competitor or otherwise has suspicions that the employee has stolen confidential information.
Employers should also conduct exit interviews and inquire where the employee is going. Exit interviews also provide the employer with an excellent opportunity to review and remind the employee of any confidentiality or noncompetition agreements. This is also the opportunity for the employer to walk through the wide variety of ways an employee may have intentionally or mistakenly retained confidential information, for example, by transferring such information to personal devices. The employer should also obtain a certification from the departing employee that he or she has not retained any of the employer’s confidential information.