Pack up the desk, turn in the keys, and hand over the company data

July 18, 2012

Google the phrase “ex-employee data theft” and you will find a laundry list of businesses that have accused former employees of lifting confidential data, customer lists, and other proprietary information, along with their moving boxes on their way out the door. Decades ago, a salesman might snag a customer list on his way out the door to a new job. Now, a departure by a computer programmer, data analyst, salesperson, or even the IT administrator can open up a company and display its secrets to competitors, consumers, regulators and anyone else who might be interested.

According to a study cited in a 2009 Washington Post article, roughly six out of 10 departing employees admitted that they took company data such as an email list from their old employer. Four in 10 departing employees said they stole their past employer’s proprietary secrets to help find a new job. As technology has given employees greater access to company secrets and intellectual property and made it easier to walk out the door with it, employers may have cause for concern.

Protecting company secrets when employees leave

A recent article for Entrepreneur.com provides several helpful tips to protect company data for business owners. Tips such as keeping an eye on unhappy employees and limiting unnecessary access to company servers, portals, and files can significantly reduce employee data theft. Protecting company information and intellectual property can take a concerted effort by the human resources department, IT, and the corporate legal department to prevent a breach — new technologies and keeping a pulse on employee morale can help.

But those in the corporate legal department may be most interested in the legal tools that can set an employee’s expectations about company data, and save the business from employee theft down the line:

  • Separation agreements: commonly referred to as a severance agreement, release, or settlement, this agreement creates the rules under which the employer-employee relationship will be governed if the employee leaves employment or is terminated.
  • Non-disclosure agreements or clauses: one of several types of restrictive covenants typical in the employment setting, the employee will be bound not to disclose the business’s proprietary or confidential information. (Not all states honor restrictive covenants, and some states limit their enforcement based on duration, geography, or industry.)
  • Non-competition agreements or clauses: the employee may be bound by this agreement not to work, consult, or advise the former employer’s competitors or to establish a business that competes with the former or current employer.

A letter to the new employer regarding the former employee’s obligations under his or her separation agreement puts a new employer on notice about what the employee can and cannot share and the potential liability. Find examples of employment agreements and clauses in WestlawNext’s Employment Sample Agreements.