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What Employers Need to Know About Safeguarding Their Business When an Employee Leaves

You may have heard recently in the news that the FBI executed a search warrant at former President Donald Trump's Mar-a-Lago resort in Palm Beach, Florida as part of an investigation into the alleged mishandling of presidential documents from when he was in the White House. While most former employees will not have that high of a profile, private employers frequently must confront situations involving the use confidential information by a former employee.

What actions should employers have in place to safeguard their confidential business information? Let’s discuss.

Review existing agreements that you already had in place with the employee. Determine whether and to what extent the departing employee may be violating agreements designed to protect trade secrets or confidential information. Some items to review would include:

  • Non-compete agreements
  • Non-solicitation agreements
  • Employee Confidentiality and Propriety Rights Agreement
  • Employee Handbooks or policies
  • Confidential Information Policy

Conduct an exit interview. You should always conduct an exit interview with your employees to determine why the employee is leaving and where and in what capacity the employee is working after departing.

Limit the time between notice and last day. Once it becomes clear that an employee is or may be going to a competitor, employers should consider ending the employment relationship promptly to limit the time in which the employee can gather proprietary information or connect with remaining employees. If an employer can benefit from the employee finishing projects or transitioning them to other personnel, measures should be taken to limit the employee’s access to limited information necessary to do that work, and safeguards should be put in place to protect the information from misappropriation while the employee is in the notice period.

Continuing obligations letter to the departing employee and the new employer. At the end of an employee’s time at the company you may want to consider sending correspondence to the departing employee restating the applicable ongoing obligations. If the employee is going to work for a direct competitor, consider sending a continuing obligations letter to the new employer. Depending on the level of adversity associated with the departure, and the relative risks involved, employers can provide this correspondence on their own, or can consult with a lawyer.

Consider entering new contractual obligations. In most jurisdictions, employers can request that departing employees enter into new agreements, including restrictive covenants, despite their plans to depart, if supported by additional consideration. These kinds of restrictive covenants may be appropriate if:

  • there are no existing covenants;
  • if the enforceability of existing covenants is questionable; or
  • if circumstances have changed and the employer has a legitimate business reason for requiring greater or different restrictions than existing agreements provide.

Require the return of all company property and confidential information. Collect all company property and all written, electronic, and other copies of the company's confidential information, wherever located; this could include:

  • Keys, access codes, identification cards or badges
  • Company laptops, computers, tablets, telephones, and other electronic devices
  • Credit Cards
  • Electronically stored documents or files
  • Physical files

Copy and remove computer files. Employers should create copies of all software, files, and data stored on the electronic resources or in cloud storage accounts of departing employees, store them appropriately, and later delete them from the employee's desktop and remote computers. Employers should also be prepared to document the chain of custody of this material in the event of litigation and delete the personal files of outgoing employees.

Disable employee access. Except as noted above, when you have an employee leaving your business you should disable them from accessing confidential information as soon as possible. This includes disabling their computer access, disabling access to employer resources, and disabling telephone access.

Review standard employee agreements. Use the employee's departure as a reminder to ensure that agreements designed to protect confidential and trade secret protected information are current and reflective of actual business practices.

Consider sending a cease and desist letter. If there is a strong suspicion or confirmation of unlawful activity (or the employee's inevitable engagement in unlawful activity because of where they are working), employers may want to send a cease and desist letter to:

  • communicate the former employer's position;
  • demand the end of specified activities;
  • avoid the need for formal legal action, but communicate preparedness for same; and
  • demonstrate that it acted prompted to protect its confidential information and other legitimate business interests in the event legal action becomes necessary.

Losing an employee can make employers feel on edge if confidential information can be used to unfairly compete with the employer’s business. But with the proper policies and practices in place, employers can safeguard their business so they focus on what’s worth it. If you need help navigating the legal complexities of employment law in these or other situations, contact Goosmann Law Firm at 855-909-4442.