Misappropriating Trade Secrets: Guarding Your Business from Departing Employees

By David Briggs

As unemployment dips to historic lows, most companies know that retaining employees is difficult.  Your talented employees are liable to find greener pastures and leave you in a lurch.

The problem is that many of those employees that walk off may decide that they have more value to a new employer if they take some of your confidential information on the way out the door.

We have seen a lot of cases recently about those dearly departed employees who have decided to take information with them when they go.  Contact lists, forms, mailing lists, and contract information are among the things employees seem to want to grab on the way out.

What Can Employees Legally Take?

The lawyerly answer of “it depends” is unsatisfying, but appropriate.  Employees can often take information in their memories.  For example, they can take names of contacts for key customers.  But, they generally can’t take information from a bid submitted by the company to a customer to use in order just to outbid you, since that information likely would be considered a trade secret.

What are Trade Secrets?

What that information is will be different for each employer.  There is a statute that protects all employers that is relatively generic (and therefore gives us attorneys a lot to fight over).  Some employers instead have confidentiality agreements that button up what specifically is a trade secret for their business.

Absent an agreement, we fall back on the statute.  That statute requires that information meet two requirements.  First, the information generally needs to be valuable to a competitor.  Next, you need to take reasonable measures to keep the information confidential.

How Should I Be Protecting My Trade Secrets to Keep in Confidential?

You may opt to encrypt every document and hire armed security to stand outside your server room, but the law doesn’t require anything exotic.  Your systems should be password protected and policies disseminated to employees about the confidentiality of your information.  You should have basic protocols in place for who should be able to view the information (both internally and externally).

If you or your employees are regularly sending your “confidential” information to venders, competitors, or colleagues outside the organization, it seems hard to argue that we have done enough to protect that information later.

You can get confidentiality agreements with employees that more particularly describe their obligations.  You can also get non-dislcosure agreements with third-party recipients of your information.

What Should I Do Now to Protect My Information?

Obviously the first step is to review your policies and procedures on how you handle and safeguard the information.

Consider getting confidentiality agreements with your employees and non-disclosure agreements with third parties.

Finally, if you’re concerned with your employees’ ability to walk away with some of the work, regardless of what information they take with them, consider getting a non-piracy agreement that prevents employees from soliciting or serving your customers or taking more employees along with them.  After all, if one employee defection is bad, multiple defections are worse.  Plus, you can get these kinds of agreements at any time during your employee’s employment with the company.


In a market where unemployment has dipped to record lows, we all must expect employee departures.  However, with some planning, you can make sure that when they go, it’s only them that go and not your confidential information.[/vc_column_text][/vc_column][/vc_row]