Under lock and key Featured

7:00pm EDT November 25, 2009

There is more than paperwork and finding a replacement when an employee leaves your company. Employees access and utilize a lot of information while working for you; information that can be devastating if it falls into the hands of a competitor.

Therefore, you need to take proactive steps to ensure that your information is kept confidential, even after the employee departs.

“A thorough exit interview will help ensure that all your proprietary data and information is accounted for,” says James J. Boutrous II, a member at McDonald Hopkins LLC, and co-chair of the Trade Secret, Non-Compete and Unfair Competition Practice Group. “It also shows that you will be vigilant in protecting the company and its intellectual property.”

Smart Business spoke with Boutrous about how to keep your trade secrets and confidential information guarded and protected.

How can you protect your business information and valued relationships?

Protecting your proprietary information when an employee departs requires attention to detail at the beginning and end of the employment relationship. A reasonably tailored noncompetition agreement can provide substantial protection by limiting a departing employee’s ability to make competitive use of information gathered during employment. You can also use patents, trademarks, copyrights, bilateral contracts and statutory trade secret law to protect your trade secrets and customer relationships.

Well-drafted covenants and proper internal measures can protect you on the front end, while employee exit interviews to assess any potential risks can protect you on the back end. You also need to be prepared to move swiftly and decisively when violations of the restrictive covenant, the Uniform Trade Secret Act, or both are discovered.

How can you secure your company’s assets?

Review your business to determine the assets that need to be protected. Identify the protected business interests that each employee is exposed to and utilizes in his or her position. These include client/customer relationships, supplier relationships, employees, bidding information, pricing and margin information, strategic plans, and prospective business opportunities, among others.

You need to draft restrictive agreements tailored for each level of employee. These can be less restrictive (confidentiality agreements) to the most restrictive (global noncompete agreements) depending upon the level of employee and his or her access to your confidential business data.

You need to enforce restrictive agreements by consistently addressing violations. Failure to take immediate action can affect any current issues and future enforcement actions. Move swiftly, aggressively and with a fine-tuned strategy that incorporates your needs, governing law and local state nuances.

How can you keep confidential information guarded?

Keep all information locked and stored, with limited access. Information should be available on a need-to-know basis. Access to storage rooms and information should only be able to be obtained through electronic keys, and confidential information should be clearly marked. Also, restrictions should be placed on visitors’ access to sensitive locations where information is stored.

Create an employee policy regarding the use of confidential information. Require routine verification and reminders of confidentiality procedures and policies. Follow-up with departing employees who have access to confidential information. Finally, prohibit the removal of confidential information from the company premises, restrict the copying of confidential information and conduct exit interviews with all departing employees.

What are the key aspects of a successful exit interview?

All information should be reported in an exit interview acknowledgment form, which is signed by the departing employee. This should obtain and confirm the departing employee’s new employer and nature of the new employment. It should contain an acknowledgment by the employee of his or her exposure to and use of trade secrets and/or confidential information, and his or her continuing obligations relative to that information.

The employee should be reminded that any use or disclosure of this information is strictly prohibited. Even if no proprietary information agreement was signed, employees should be reminded that they owe fiduciary obligations to not use or disclose confidential or trade secret information.

Employees should also be reminded of what information you consider to be secret or confidential. Specific items should be identified, so employees clearly understand that the list is not exclusive or limiting.

Also, the departing employee needs to be reminded and provided a copy of any restrictive covenant that he or she executed. The departing employee should acknowledge that all copies of confidential documents and information have been returned.

What are the benefits of exit interviews?

It shows that you are willing to take the steps necessary to protect your information, reaffirming your commitment to the protection of information. The departing employee is also put on notice about your concerns, if any, with his or her new employment.

The exit interview can be an effective barometer to gauge whether an individual employee may be a problem in the future. A departing employee who refuses to sign an acknowledgment form, or is less than candid in an exit interview, is indicative of potential issues post-employment. Further, evidence of a refusal will assist you in convincing a court that a clear threat of misappropriation exists. Failure to conduct an exit interview can create practical problems and make it more difficult to establish entitlement to post termination relief from a court.

James J. Boutrous II is a member at McDonald Hopkins LLC, and co-chair of the Trade Secret, Non-Compete and Unfair Competition Practice Group. Reach him at (248) 220-1355 or jboutrous@mcdonaldhopkins.com.