Use Employment Agreements to Protect Trade Secrets
Employee brain power is often the most important
asset a company can draw upon. This includes everything from the
accumulated knowledge of company procedures, policies and basic operations to
very specific and valuable facts about proprietary products and services and
important customer information. In today's digital marketplace, the
loss of one or more key employees who have been exposed to confidential
company information can be devastating.
It is also a fact that employees switch jobs on a
regular basis, especially in the software and e-commerce fields. New
opportunities and information about new opportunities abound. Many
employers, knowing this fact, attempt to restrict employee mobility through
non-competition and confidentiality provisions in employment agreements.
Various, states, however, treat these types of
agreements differently. California employees cannot be required to agree
not to compete upon termination of employment, for instance. Recent
court rulings in California indicate that this rule covers ìvirtual
employeesî who work for a California company in a different state.
Other states enforce agreements in varying manners and most states will not
enforce agreements that are overly broad and too restrictive.
Ask new employees to sign a written
confidentiality agreement upon hiring. Explain his or her rights under the
agreement carefully. Determine what covenants are appropriate and what exactly
is to be protected. Some examples include:
Nondisclosure of trade secrets and
confidential information?
Noncompensation?
Nonsolicitation of customers?
Nonsolicitation of employees?
A combination of all or some of the above?
Once an employee is on board, continue to take
steps to define sensitive areas and to plan for inevitable employee departures
Alert employees and third parties to the
existence of trade secrets and their proprietary and confidential nature.
This especially includes items like financial information and drawings.
Remind employees, through newsletters and memoranda, of the
confidential nature of their work.
Limit access to confidential information to those who need to know.
Impose reasonable security measures.
Avoid public disclosure of alleged trade secrets.
Upon termination, act quickly but avoid the
appearance of being overbearing. Conduct an exit interview and document
the following:
Obtain the name of the new employer and a
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