Posted by: kevensteinberg
Category: Blog, Business Law, Employment Law
company property out the window

When employees leave your employment, whether voluntarily or involuntarily, they have the ability to take your valuable company property, your confidential business and proprietary information along with them, such as: customer and client lists; pricing information; financial records; and even your “secret sauce,” are all vulnerable.

In order for employees of any level to perform their job duties, they must be provided with a certain amount of company property, information and data which is not otherwise available to the public.  Depending on the job duties and level of the employee, this information and data is critical to the operation of your business. It is hard enough to keep this information, data and proprietary information within the four walls of your business while the employee is still employed; but when an employee leaves your employment, you lose all control.

In order to restrict, prevent and prohibit the spread of your most valuable company property, proprietary information and data from flying out the window, adequate safeguards must be put in place.

Confidentiality Agreements to Protect Your Company Property

Every level of employee should sign a comprehensive confidentiality agreement at the time of hiring.  This agreement should define, in a broad manner, all actual, probable and possible confidential and proprietary information of your company.  This definition is critical not only to the confidentiality agreement, but also to its later enforcement. 

Following that, restrictions, limitations and prohibitions should be described so that it is clear what can and cannot be done with this confidential information.  This should include restrictions on disclosures to third parties, including family members, friends and colleagues, as well as the employee’s responsibilities if third parties disclose this information.

It should also be made clear that these duties and responsibilities extend beyond the employer-employee relationship and that the disclosure of such information following termination or separation of employment would subject the employee to liability.

To add some teeth to the confidentiality agreement, an employer can include a liquidated damages provision – a type of penalty provision. The stated penalty should be of an amount which will act as a deterrent to any disclosure. For example, if there is a $50,000 to $100,000 penalty for each breach, this should act as a strong deterrent.

Non-Disclosure Agreements also Protect Your Company Property

These are very similar to confidentiality agreements, except they can be a bit broader in scope.  The restricted disclosures need not be limited to confidential or proprietary information. Indeed, many public figures and celebrities have and insist upon non-disclosure agreements (sometimes referred to as NDAs) to protect private information such as where their children attend school, what foods they eat, what medicines they take and what cars they drive. 

NDAs are also frequently used in business where companies are working together or desire to work together.  In both instances, each company intends to and will have to release certain confidential, proprietary or private information to either form a business relationship or at least to explore certain business opportunities.  In these instances, NDAs are critical not only for the initial “dating period”, but also following the “divorce” or conclusion of the business relationship. If a proper NDA is entered into, each company will be protected following the business transaction.

Cyber Protection for Your Company Property

An employee’s computer and workstation are each a treasure trove of company property such as information and data.  Depending on an employee’s access credentials, an employee from the privacy of their own computer or workstation can literally steal all your confidential and proprietary information.  This is easily accomplished by illegal downloads, file sharing, emailing or any other variety of data and information capture and dissemination.

While there are a number of IT security measures that can and should be put in place, this article focuses only on what can occur if and when an employee separates from employment.

Whether an employee quits or is terminated, all computer access of that employee should be severely restricted or shut down immediately.  At this point, the employee is or will be off in the wind and you do not want your company information and data to go airborne as well.

Information Sharing with Former Employees

It is not uncommon for an ex-employee to reach out to a current employee to ask for company information.  Given the fact that co-employees usually form some sort of bond with one another during the employment period, this is almost natural. 

While an employer cannot restrict or prohibit all communications with former employees, the employer should have in place a written policy about what information can and cannot be communicated to former employees.  This should include any downloading, forwarding or mailing of company information. If appropriate, when an employee departs, current employees should be reminded of their confidentiality obligations.

Be prepared.  Even your most trusted and long-term employee can be your company’s greatest risk.  Having in place these safeguards will protect your valuable company assets and information from flying out the window when your employee walks out the door.

When you need help ensuring that your company property isn’t flying out your window, please call Keven Steinberg for your complimentary discovery conversation at (818) 855-1103.

Author: kevensteinberg