Protecting the Company Purse: Six Rapid Responses to Secure Company Information When an Employee Bolts for a Competitor

By Chris M. Mason

Employers in today’s fast-paced business climate may feel like they are racing in circles when attempting to trust employees with critical company information and also protect that very same information from misuse.  Diligent use of non-disclosure agreements from the inception of the employment relationship is just the beginning.  Staying ahead of the pack also requires quick action when employees depart.  Employees who depart for a competitor often have an unfair early lead.  Chances are that they have planned and timed their departure for their benefit, and have strong incentive to use confidential information that they have acquired about their employer’s business in their new job.  To regain the advantage and shield key information from misuse and prying eyes, employers should consider promptly taking the following steps once a key employee announces a departure for a competitor.

1.  Discontinue Employee Access to Confidential Information

Once an employer learns of an employee’s intended departure for a competitor, it should immediately sever the employee’s continued access to confidential information.  It should require the employee to return all confidential documents, marketing plans, customer information, and similar data.  These measures should be designed to include both hard-copy and electronic records.  Procedures should be well-established even before a departure is announced to provide for limiting or discontinuing computer access, and to cease routine automatic distribution of reports, sensitive emails and other documents that contain company confidential information to the employee.  Company keys, cell phones, laptops, and other tangible property should also be secured.

2.  Review the Employee’s Email Account and Computer

The departing employee’s computer and email account should be reviewed to ensure that the employee has not taken or otherwise misused confidential information or diverted clients and/or information.  Before doing so, though, employers should properly image – or copy – the computer hard drive to ensure proper preservation.  Although this may add cost to the process, it is crucial to protect the evidentiary integrity of the electronic information on the computer.

3.  Remind the Employee of his or her Continuing Obligations

A departing employee should be reminded of his or her continuing obligations to protect company trade secrets and confidential information, and to observe other contractual obligations, when he or she departs.  Whether this is done in person during an exit interview, or exclusively through a transmitted communication, the instruction should be in writing to ensure that there is no dispute over what was said and whether the reminder was provided.

4.  Consider Other Investigation

Depending on the circumstances, the employer should also conduct at least some additional investigation, even if minimal.  Evaluating the employee’s activities in the final few weeks or months of his her employment, for instance through review of his or her client contacts, sales, and other activities may reveal tell-tale signs of pre-departure competition or diversion of information.  The employee’s blog posts, Facebook updates, and similar social media activity are often surprisingly ripe with helpful information.  Other employees may also be aware of pre-departure misconduct.  Careful canvassing of these resources should at least be considered in every case.

5.  Assign Tasks and Clients to Other Employees

Client and key task responsibility should be assigned to other employees to handle following the employee’s announcement of an intended departure.  The best protection an employer has against diversion of clients is to continue strong, meaningful relationships with those clients.

6.  Consider Notifying the New Employer of the Employee’s Obligations

While unnecessary in every case, in some situations it may help to notify the employee’s new employer of the employee’s obligations to protect certain confidential information.  Doing so puts the new employer on notice.  This, in turn, will either incentivize the new employer to ensure that the employee does not improperly misuse confidential information or put the new employer to potential liability if it benefits from any such misuse.

These measures will not in themselves provide certainty against misuse of information.  However, when they are coupled with non-disclosure agreements and strong information security protocols, they often provide employers with the necessary boost to accelerate ahead of any improper competition.