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Protecting Confidential Information and Customer Relationships When Employees Leave Article

    September 3, 2014

    Protecting Confidential Information and Customer Relationships When Employees Leave

    By CCHRA Legislative Chairperson Jennifer Ermilio, Esq. (September 2014)

    It’s 5 p.m. on Friday afternoon.  Your CEO calls to tell you that your company’s top salesperson just quit. What do you do?

    Protecting confidential business information and customer relationships in the Information Age is harder than ever.  No longer do employees walk out with a Rolodex that can easily be returned.  Electronic information can reside anywhere, on smart phones, flash drives and in the cloud, and customers can be contacted right away via cell phones, LinkedIn, and email, just to name a few.

    In Pennsylvania, trade secrets are protected by the Pennsylvania Uniform Trade Secrets Act.  Whether customer lists and information are protectable trade secrets under the Act depends on the circumstances.  If the information is merely confidential and doesn’t meet the definition of a trade secret, it is not protectable without an agreement from the employee acknowledging its confidentiality.  And, generally, employers can’t prevent former employees from contacting their customers or working for a competitor without a well-drafted non-solicitation or non-compete agreement. 

    Therefore, it’s important for HR to have policies, procedures and agreements in place to protect the company’s key business interests before employees leave.  Some of the things HR can do to help lessen the risk that employees will walk out with confidential information and take customers relationships with them include: 

    • Confidentiality and Return of Records Policies.   Employee policies specifically identifying the employer’s confidential information, stating that such information is not to be used or disclosed other than for company business purposes, and requiring its return upon termination of employment are strong starting points for protecting  employers’ confidential information from employee misuse. 
    • Confidentiality and Non-Disclosure Agreements.  Since employee confidentiality policies may not be given the force and effect of a contract, it is good practice to have employees also sign confidentiality agreements when they begin employment or before being given access to certain confidential information.  For large companies, employers may wish to use different agreements for different departments and/or levels of employees, depending on what confidential information they may have access to.
    • Keep Confidential Information Confidential.  Information that is identified as confidential should be treated as such by all employees, or it may lose its confidential status.  HR should train employees to take precautions against wrongful disclosure and misuse of confidential information.  Access to confidential information should only be given to those who have a need to know it to carry out their jobs. 
    • Bring Your Own Device or Employer Provided Device Policies.  If employers allow employees to use their own electronic devices for business purposes, they should have clear written policies giving the employer access to employees’ personal devices, particularly upon termination, for inspection and purging of company information.   Likewise, if employers prefer to have employees use employer provided devices, a clear policy should be in effect requiring use of these devices for business purposes and requiring that the devices be left at the employer upon termination.
    • Non-Solicitation and Non-Compete Agreements.  Employers should consider using non-solicitation and/or non-compete agreements for their sales forces and other key employees.  A non-compete agreement will prevent an employee from performing the same or similar services for a competitor for a certain period of time within a certain geographic range or for specific clients.  A non-solicitation agreement may prevent a former employee from soliciting or contacting the employer’s customers, but will not prevent the employee from working for a competitor.   Both types of agreements must be designed to protect legitimate business interests, be reasonably limited in duration and geographic scope, and be applied consistently, in order to be enforceable. 
    • Immediately Cut Off System Access.  HR should work with IT to immediately cut off departing employees’ system access on all devices upon termination and arrange for incoming messages and calls to be redirected. 
    • Exit Interviews.  HR should conduct exit interviews with all departing employees to, at a minimum, find out employees’ future employers, duties and any plans for contacting customers.  HR should use the exit interview to remind employees of their post-employment obligations and make sure all confidential information in the employee’s possession, as well as access keys and cards, are identified and returned.
    • Reminder Letters.   It is also good practice to send out letters to departing employees reminding them of their post-employment obligations.  In certain instances, employers may wish to notify the employee’s new employer of the obligations so that the new employer is on notice of any post-employment non-compete and non-solicitation restrictions.

    Taking proactive steps such as those listed above, should help make things easier next time you lose an employee.  So, when the CEO calls Friday evening, you can tell her, “Don’t worry, we’ve got it covered!”

     

    Disclaimers:

    This article has been prepared for informational purposes only and does not constitute legal advice. The information presented is not to be construed as an offer to represent you, nor is it intended to create, nor does the receipt of such information constitute, an attorney-client relationship.  Each situation is unique and the generalities mentioned may not apply to your situation.  Therefore, you should not rely on the information contained in this article without first obtaining the advice of a competent employment attorney.  

    The opinions and views expressed in this article are the opinions of the author and do not necessarily reflect the opinions or views of CCHRA or its members.