As companies face increasing competitive and financial pressures, management is understandably consumed with running the day-to-day operations of the business and working to achieve business objectives and maximize the bottom line. As a result, it is not uncommon for companies to find themselves in situations where important assets are overlooked or taken for granted. Yet, those same assets can be lost or compromised in a moment through what is often benign neglect.
Authoritative sources estimate that companies lose hundreds of millions of dollars (if not billions) as a result of trade secret theft. At the same time, companies sometimes find themselves, through poor controls, exposed when they inadvertently obtain others’ trade secrets.
In the rush to deliver results, some companies take shortcuts in the hiring and departure process that often leave them exposed to claims for trade secret misappropriation, aiding and abetting breaches of loyalty, and intentional interference with contractual relationships or business expectancies with customers or employees.
California’s strong public policy against certain employee noncompetition agreements and post-termination restrictions on employee mobility means strong trade secret protections are essential for California employers to protect against the unlawful use or disclosure of valuable company information and related competitive issues when key employees join competitors. Accordingly, while non-competes may be void in California, prudent companies conducting business in California will ensure that their trade secret protection practices are state of the art, including their onboarding and offboarding process.
In this second video of a two-part series (see part one here), we illustrate some best practices when interviewing a competitor’s employees, as well as handling your own employees’ departures, regarding the protection of trade secrets and other confidential information in California. During the video, a prospective candidate offers to share during his employment interview his current employer’s trade secrets regarding sensitive business and customer information for the Southern California market. You will also see how the employer handles the exit interview of that employee.
When watching the video below, consider the following:
- How does the interviewer avoid the applicant’s disclosure of trade secret and other confidential information and focus the candidate on general skills and knowledge?
- How does the prospective employer condition its offer of employment?
- How does the current employer try to protect its trade secret and other confidential information with departing employees?
- What type of policies and procedures do the current employer and prospective employer put in place to better protect themselves?
Click below to discover some of the best practices illustrated in the video and in general to protect trade secrets.
- Discuss general skills and talents, not employer’s customers or trade secrets
- Tells candidate to be careful not to reveal his employer’s trade secrets or confidential information
- Controls the interview and puts the applicant at ease
- Encourages the applicant to give two weeks’ notice to assist his employer with the transition
- Asks the applicant for all copies of his previous employment agreements, and indicates that the offer is contingent on a review of those agreements
- Consider putting in a position if hired where the employee will not reveal confidential or trade secret information
- Make clear that the applicant should not, under any circumstances, use or bring any of his former employer’s property, including trade secret or confidential information, or solicit any former co-workers
The Applicant’s Current Employer
- Conducts an exit interview
- Uses a checklist to ensure the employee returns all company property, including computer devices, hard copy documents, and online account passwords
- Disables employee’s access to computer systems and networks
- Investigates prior to exit interview whether employee has taken, forwarded, or retains possession of any company documents or files and asks for the return of such information
- Reviews projects employee worked on to determine that all corresponding property has been returned
- Asks employee whether he worked at home and to make arrangements to coordinate the return of company property located on his personal computer devices
- Utilizes a written agreement with the employee to clarify the ownership and use of the company’s social media accounts
Other Generalized Tips to Protect Trade Secrets in the Hiring, During Employment and the Departure Process
- Conduct new hire training on the importance of protecting your company’s assets. Be sure to cover obvious topics, such as following computer access policies and your company’s data encryption system, and less obvious topics, such as the possibility of accidental trade secret disclosure from holding business discussions in public places. Engrain a culture of protection of company assets through respect for confidentiality.
- Separate out trade secret agreements and training from the piles of paperwork and training that new employees receive so that they are not glossed over or disregarded as “just another piece of paper to sign.”
- If the new employee’s position at your company is going to be substantially similar to his or her previous position, consider initially assigning the employee to different projects. Also consider temporarily modifying the new employee’s job responsibilities.
- Periodically review the new employee’s work to confirm that he or she is not utilizing confidential and proprietary information belonging to previous employers. Monitor the employee’s computer to ensure that confidential and proprietary information belonging to previous employers is not uploaded to company computers.
- Periodically follow up with all employees to ensure continued compliance with policies and agreements put in place to protect confidential information. Always emphasize the importance of protecting company trade secrets. Training employees solely at the new hire stage is not sufficient in the long run.
- Make sure you have an exit interview.
- Question the departing employee in detail about his or her new job, including identifying the new employer, position, duties, and responsibilities. Ask the employee why he or she is leaving. Question the employee on his or her access to company trade secrets during his or her employment. Question the employee on his or her possession of company property and his or her return of such property.
- Question the employee concerning any suspicious activities related to company property and computer access/ usage.
- Consider using an exit interview certification in which the departing employee acknowledges or certifies his or her understanding of his or her obligations. At the very least, provide the departing employee with a copy of his or her employment agreement. Inform the employee that the company expects departing employees to conform their conduct accordingly and instruct the employee to provide a copy of the agreement to his or her new employer.
Please check out this helpful practice guide for additional best practices to protect trade secrets during the onboarding and departure of employees.
For more information regarding California’s peculiarities concerning trade secrets and employee mobility, please see Chapter 12 of the California Peculiarities Book.
Edited by Julie Yap