By Robert Milligan, Jessica Mendelson, and Joshua Salinas

Prudent employers are often looking for areas in their business where valuable company data may not be adequately protected.

Enter the growing prevalence of third party online data storage for professional and personal use in the workplace, coupled with the increasing accessibility provided by employers to access company data remotely. 

While the benefits of cloud computing are well documented, the growth of third party online data storage has facilitated the ability for rogue employees to take valuable trade secrets and other proprietary company files, in the matter of minutes,  if not seconds.

There are have been several high profile cases in California recently addressing the alleged theft of company data by employees through the use of third party online data storage.

To address this technology and threat to companies, employers must be vigilant to ensure that they have robust agreements and policies with their employees as well as other sound trade secret protections, including employee training and IT security, to protect their valuable trade secrets and company data before they are compromised and stolen. This is particularly important in California because California law can provide limited protection for employers—compared to other jurisdictions—because of its general prohibition of non-compete agreements and growing trade secret preemption or supersession doctrine.

As we have previously discussed, one of the notorious employment laws separating California from other states is its long-standing and draconian prohibition of employee non-compete agreements. Additionally, some recent California decisions have significantly limited an employer’s ability to pursue certain claims and remedies based upon the theft of mere confidential or proprietary information by rogue employees.  Employers may have limited recourse under California law if the stolen data does not rise to the level of a trade secret at least under a tort theory of recovery.  

Further, a recent article in The Recorder entitled “Trade Secrets Spat Center on Cloud,” observed that the existence of cloud computing services within the workplace makes it “harder for companies to distinguish true data breaches from false alarms.”

Given these challenges, employers should implement policies and agreements to restrict or clarify the use of cloud computing services for storing and sharing company data by employees. Some employers may prefer to simply block all access to such cloud computing services and document the same in their policies and agreements. Also employers should provide education and training regarding the company’s policy regarding employee use of cloud storage services.

Additionally, certain key steps should also be taken to protect against the theft of trade secrets and confidential information by departing employees with this new threat in mind:
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