BFV Perspectives, Covid-19 Updates, Noncompete & Trade Secrets, | Aug 26, 2020

Pandemic: Reducing Risk of Trade Secret Theft by Departing Employees

In the face of enormous changes in the workplace due to the COVID-19 pandemic, have you given thought to trade secret theft by departing employees?  

The pandemic has inevitably led to job loss as some employers have been forced to furlough employees or reduce staff.  Although involuntarily terminated employees are not typically leaving to directly take a position with a competitor, there is still a threat that, in the future, a departing employee can use or disclose company trade secrets to a competitor. 

Trade Secret Theft by Departing Employees
Below are some suggestions on how business owners can minimize the risk of trade secret theft by departing employees during the pandemic:

  1. Assess the risk.
    Determine if the departing employee had access to sensitive information, or if the role that employee held within the company makes it more likely that trade secret theft will occur. For example, if the employee had access to information that could be used by a competitor for unfair competition, it may be more likely that trade secret theft by a departing employee would occur.  Additionally, trade secret theft is more likely if the departing employee held a role within the company with access to confidential or proprietary information, such as sales or research and development, as opposed to a clerical role.  (Click here for more information on assessing the risks posed by departing employees.)
  2. Have the departing employee verify that he/or she has not retained any business materials.
    As part of the exit interview process, ask employees to identify company information that is in the possession of the employee and request that the information be returned to the company.  In lieu of an in-person interview, employers can request that departing employees electronically sign verifications that the employee has not retained company property including, confidential information and/or company trade secrets.
  3. Perform an investigation to determine if any information has already been taken.
    Reviewing the email of a departing employee may reveal if company trade secrets or sensitive information was emailed to that employee’s personal email address. Performing a forensic investigation of the departing employee’s company electronics may also reveal if information has been either uploaded to a cloud storage service or downloaded to an external storage device, which can indicate a high risk that the departing employee has retained confidential and/or trade secret information.
  4. Review the departing employee’s agreements with the company.
    Also, as part of the exit interview process, companies should review any restrictive covenants in the departing employee’s agreements, including those restrictions concerning non-solicitation, non-competition, employee non-recruitment/solicitation, and confidentiality.

After the risk of trade secret theft has been assessed, if the departing employee presents a high risk of trade secret theft, a company should take additional steps to protect company interests and trade secrets. 

As always, please let me know if I can help.

BFV Perspectives, Covid-19 Updates, Noncompete & Trade Secrets, | Aug 26, 2020
Benjamin I. Fink
Benjamin I. Fink

Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.