Tips for Protecting Confidential Information and Trade Secrets When an Employee Leaves the Company

The need to protect confidential information and/or trade secrets when an employee leaves the company, either voluntarily or involuntarily, is critical. Quite significant damage can be done when employees are terminated, and they will often have an ax to grind. Even employees who resign to go elsewhere or start their own business can pose a risk. Employers should consider proactively putting policies and procedures in place to safeguard the company’s confidential information and trade secrets. This post discusses best practices to protect company trade secrets and confidential information when an employee leaves the company.

Employee Handbook

The first and best way to protect your company’s confidential information and trade secrets is to address the relevant topics in the employee handbook before an employee leaves. Some of the policies a business owner should address in the employee handbook include company expectations regarding intellectual property, proprietary information, and confidential information.

Employee Employment Contract

If your business uses employment contracts, it is useful to have the employment contract clearly address company expectations related to intellectual property, proprietary information, and confidential information. It would also be helpful for the agreement to clearly lay out the employee’s post-employment obligations, including any consequences for failing to uphold company policy.

Confidentiality Agreement

In addition to including confidentiality language in the employee handbook and contract, the employer may wish to have the employee sign a separate Confidentiality Agreement before he or she begins to work for the company. If your company has important intellectual property, you may want an Agreement that covers nondisclosure and trade secrets. These agreements are especially helpful for an employer if an employee attempts to steal intellectual property or a trade secret during or after their employment.

Safeguard Intellectual Property

Businesses may also wish to consider safeguarding important company intellectual property by controlling access to specific documents, limiting electronic transmission of confidential information, or by monitoring which employees download specific confidential company material.

Provide Training on Trade Secrets to Employees

If your business has trade secrets that need to be protected, it’s a good idea to provide training to your employees on the topic. Clearly define what a company trade secret is and the consequences for disclosing one.

Audit Company Trade Secrets Regularly

To best protect company trade secrets, it’s good practice to conduct periodic audits. During these audits, identify and classify each trade secret. The audit should include an assessment of each trade secret’s value. Review policies in place to protect trade secrets, whether they are effective, and have a plan in place if there is a breach of confidentiality.

Departing Employees

When an employee is involuntarily terminated, it is a good idea to protect confidential company information proactively. An employer should remind the employee of his or her commitment to confidentiality, limit the employee’s use of company systems, collect company devices as soon as possible, and consider using financial incentives to encourage compliance with post-employment confidentiality. When an employee leaves the company voluntarily, it’s still good practice to have a standard set of practices for employee departure including an exit interview, inventory check, reminder of the confidentiality agreement, monitoring email and company files downloaded by the employee, and limiting access to computer systems.

Conclusion

Take the time now to proactively protect your company from harm. Consult with legal counsel if you need help developing confidentiality policies, especially if you have complex intellectual property. Preparing for a worst-case scenario may not feel like a priority now, but should confidentiality be breached in the future, you will be glad you did. Better yet, preparing and training adequately may keep the breach from ever happening.

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