One of the primary reasons for using a restrictive covenant agreement is to protect a company’s confidential information and trade secrets. By implementing certain behaviors, a company can significantly enhance its chances of winning trade secret and/or confidentiality disputes later down the road. These behaviors are focused on ensuring that the company takes reasonable steps to maintain the secrecy of that confidential information.
1. Best Practice Behaviors at the Beginning and During Employment
In General: Most states, whether through some derivation of the Uniform Trade Secrets Act, or by other statutory and/or common law, define what qualifies as a trade secret and require that companies engage in reasonable efforts to protect the trade secrets. For example, for something to be a trade secret in Illinois it has to be, among other things, sufficiently secret and must be subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality. Specific steps companies can take to enhance their ability to enforce nondisclosure agreements and claims under a trade secrets act include the following:
- specifically identify the confidential information to be protected;
- inform and remind employees of their confidentiality obligations at hire through policies, policy acknowledgements, and agreements, and during employment through periodic training and reminders;
- have technology policies that prevent both use of confidential information and access to company databases for improper or competitive purposes;
- stamp documents as “confidential”;
- physically secure documents;
- limit access to documents;
- use layered security codes, computer passwords, etc.;
- require confidentiality agreements before sharing information with vendors, consultants, or contractors, including with temporary staffing agencies and workers, before allowing on-site temporary workers access to the information; and
- make sure the confidential information sought to be protected is not publicly available, i.e., on websites, sales brochures, and public filings, etc.
2. Best Practice Behaviors at the End of Employment
- Use exit interviews to remind employees of the company’s confidentiality and computer use and access policies, agreements, and any other obligations the employee may have to the company. The exit interview is also an opportunity to identify and collect all company property and determine an employee’s intentions after they leave.
- If there is a non-compete or confidentiality agreement at issue, be very specific and ask each employee where they are going and if it is to a competitor.
- Check and secure the employee’s computer, smartphone, and voice mail records. Have a policy that preserves all electronically stored information on the employee’s computer, flash drives, and smartphones for a period of time (i.e., do not simply put them back into use and keep them in a secure location).
- Provide notice to the new employer of the employee’s obligations, along with a copy of the employee’s agreement.
- If there is any suspicion of wrongful competition or threatened wrongful competition, partner with your attorneys immediately to implement the best strategies to preserve and collect evidence to support the company’s case.
Stay tuned for the next installment of our series on “Watch Your Assets,” where we will continue to discuss best practices for protecting confidential information.