Losing an employee, especially a key employee, is difficult for any business. You’ve invested time, know-how, and resources in your employees and they in turn are the lifeblood of your business. Unfortunately, people leave and when they leave, it is usually to work for a competitor or even to start a competing business. If that employee had access to your company’s confidential information such as customer lists, customer preferences, pricing formulas, and any other information that gives you a competitive edge, you want to make sure that the employee can’t take that valuable information to a competitor.
How do you protect trade secrets from a competitor when an employee leaves?
I have good news and bad news for you.
The bad news:
If the first time you think about protecting your company’s confidential information is after a key employee leaves, it may be too late.
One of the fundamental requirements under California and Federal laws that protect trade secrets is the requirement that you made reasonable efforts to keep that information a secret.
Thus, if you haven’t thought about how to protect information that is valuable to you early on, you probably haven’t taken the appropriate steps to protect that information.
The good news:
There are many simple, low-investment tools that you can implement right now to protect your confidential and trade secret information going forward.
- Identify which documents or information you need to protect.
- Mark those documents as confidential;
- Limit access to information and documents on a need-to-know basis;
- Create, with the assistance of counsel, a Confidentiality Agreement that communicates the importance of keeping information confidential and the prohibition against using or disseminating the information to third parties. Although not required by law, it helps strengthen your position;
- Outline the expectation and procedure for returning company property when the employment relationship ends in an employee handbook;
- Create a checklist of documents and property that employees must return;
- Remind employees of their obligations in writing when they leave; and
- When necessary, let the departed employee’s new employer know that they signed a confidentiality agreement.
The success of your business depends on your ability to anticipate problems and to successfully mitigate and craft solutions for those problems. It is a certainty in the life of your business that employees will leave and that you have confidential information that you don’t want employees to take with them. By taking the necessary steps to protect that information and having written evidence of the efforts that you take, you can help your lawyer help you when the moment comes for you to ask a court for protection.
If you would like to discuss ways to protect your company’s trade secrets or need help with a dispute, feel free to contact me or call (949) 529-0007.
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