Now that New Year’s is behind us, companies face one of the riskiest times of the year for protecting their trade secrets and proprietary information.
As I’ve discussed in the past, employee departures present perhaps the greatest risk of unwanted trade-secret disclosure. And many employees who want to leave wait until after they receive their year-end bonus. With this increased employee movement comes an increased risk of misappropriation.
This is a great time of year to review employee intake and exit procedures. Departing employees need to be made aware of their legal obligations regarding the company’s proprietary or confidential information. This is best done through an exit interview. Whenever possible, a departing employee should sign an acknowledgement of her obligations.
During the exit interview, the company should learn as much as possible about where the employee will be working next. This helps identify situations where proprietary information is at risk. In such situations, an attorney should be consulted. For more details about exit interviews, see this prior post.
Similarly, when hiring new employees, companies need to make sure the new employees will not be violating any restrictive covenants signed with former employers. During the hiring process, potential new hires need to be asked directly whether they have signed any such agreements. And once hired, they should confirm this in writing. If a company wants to hire someone who signed a restrictive covenant with a former employer, the company must consult with an attorney first.
If the new employee will be bound by a restrictive covenant such as a noncompete, make sure it is actually signed. (This may seem obvious, but it’s not uncommon for a noncompete agreement to go unsigned.)
By improving employee intake and exit procedures, companies can significantly reduce the risk of trade-secret misappropriation and expensive litigation.