In the Season of Giving, Give Some Thought to Improper “Taking” of Valuable Business Information

As we begin December and head into the end of another year, our thoughts often turn to giving.  But, unfortunately, it is also a time when employers should give some thought to taking – e.g. the possible theft of confidential business information.  It is common for employees considering career changes, whether taking a job with a competing company or starting their own business, to make that move shortly after the start of a new year (oftentimes sticking around long enough to receive year-end bonuses).  And, an all too common first step to those career moves can include the gathering of helpful business information by the soon-to-be departing employee.  A surprising number of employees still hold the simplistic – and flatly wrong – point of view that any and all of “their” work product generated while performing their job is “their property” and thus fair game to be harvested for use for the benefit of a competing company or new business.  So, the careful employer should reserve some time from year-end festivities to ensure that its vital business information is adequately protected.

The misappropriation – theft – of companies’ confidential business information and trade secrets continues, unfortunately, to be fertile ground for lawsuits.  This area also continues to gather strong interest from Congress, which continues to consider the adoption of a federal trade secrets protection law.  The vast majority of states have already adopted versions of the Uniform Trade Secrets Act, which provides protection against the misappropriation of trade secrets.

All employers should consider taking, at a minimum, the following steps to protect their company’s most valuable assets:

• Review Handbooks & Adopt Policies:  Review and update employee handbooks to ensure that they contain a policy regarding the use of the company’s confidential information, including a meaningful description of what constitutes “confidential information.”  (Remember, if a company informs its employees that essentially “everything” is deemed to be confidential information, there is a very real risk that a court would determine that nothing constitutes legally protectable confidential information.)

• Use Confidentiality Agreements:  Strongly consider having all employees – or at least employees with access to sensitive customer or business-development related information – execute stand-alone confidentiality agreements.

• Protect Your Computer System:  Utilize some limitations on access to the company’s computer system, or particularly sensitive data and files, beyond merely requiring all employees to have login passwords.  

• Consider Using Noncompete Agreements:  Consider having key employees sign non-compete and/or non-solicitation agreements.  Employers should be aware, however, that these agreements have strict requirements in order to be legally enforceable.  Those requirements vary significantly from state to state, with a few states prohibiting the use of such agreements.  Minnesota, as an example, typically upholds non-compete agreements if they are reasonably drafted, if required of newly hired employees and executed at the very start of employment.  Minnesota requires that if an existing employee is required to execute a non-compete agreement, then the employee must be given new consideration in exchange for the execution of the agreement (typically some type of monetary payment or bonus).  But the takeaway here is that a company should of course consult with its attorneys if it is considering the use of noncompete agreements for the first time.  

Taking the time to attend to these matters now may pay significant dividends for a company in the upcoming new year (and the years thereafter).  Although a generous spirit of giving is indeed an admirable thing, it should not include the inadvertent “giving away” of your company’s most valuable business information.