How to Minimize Risk to Your Trade Secrets When Employees Leave

I’m sure you’ve worked very hard to build your business, and you’ve probably spent a lot of time, energy, and money into developing processes, policies, and strategies that enable you to create and sell your products or services.

But what happens when a key employee who knows the ins and outs of those processes, policies, and strategies tells you he or she is leaving your company? How do you protect all of those systems that you worked so hard to develop for your business?

These are your valuable trade secrets, and they give you a competitive edge in the marketplace. You don’t want them to go to another business or be revealed to the public because the results could be disastrous!

I’m hoping that you’ve already required all of your key employees to sign a confidentiality agreement (or a nondisclosure agreement) when you hired them. If not, you need to do so immediately!

A confidentiality agreement requires the person who signs it (your employee) to keep specific information strictly confidential. It should identify the type of information that you consider to be trade secrets, so if necessary, you can use the agreement to protect your business from this risk of employees disclosing those secrets to anyone in the future.

Think of it this way. If a key employee who leaves your company starts a business that competes with yours or goes to work for a competitor that competes with your business, your company would certainly be negatively affected if your former employee shared your customer lists, secret recipes, manufacturing processes, financial information, and so on with the competitor.

With that in mind, consider having key employees sign non-compete agreements as well as confidentiality agreements. A non-compete agreement enables you to prevent employees who sign it from working for your competitors for a specific period of time (and usually within a specific geographic area).

3 Things You Should do before Your Employee Leaves

When an employee expresses his or her plans to leave your company, you should do three things to strengthen your ability to protect your trade secrets:

  1. Determine if you want the employee to continue working for your company, and if so, find out why he or she wants to leave. Try to address the issues and retain the employee.
  2. Review any agreements that are in place with the employee and discuss their expected ongoing compliance with the terms of those agreements.
  3. Determine where the employee is going to work when he or she leaves. If the next step is working for a competitor, notify the competitor of any areas of concern as well as your intent to hold the employee to the agreements that are in place related to your trade secrets.

If the three steps above don’t work, a lawsuit might be the only way to protect your trade secrets. However, your lawsuit won’t be successful unless you can show that you took reasonable measures to protect your trade secrets in the first place. That means you need to have the right agreements in place now.