Does your business have a client list? An internal marketing strategy developed through trial and error? A proprietary business process? If so, those are just a few things that may give your company a competitive advantage over other similar businesses and may be considered your company’s “trade secrets.”
Now imagine one of your employees walking out the door and taking that information to a competitor because they were offered a slightly better compensation or using that information to start their own copycat business after they are laid off. This happens on a daily basis, and especially now, when, according to the Wall Street Journal, many laid off employees are turning to starting their own businesses. Yet, many companies are still not doing anything to protect their trade secrets from leaving with the departing employees.
Here are the two steps that every company can take to protect their trade secrets that will cost next to nothing:
Have employees sign confidentiality and non-competition/non-solicitation agreements. These agreements do not have to be complex, but they have to comply with the laws of the state where the company operates and possibly with the laws of the states where the employees work. So, for example, if a company is based in Texas, but it has employees in Louisiana, the confidentiality and non-compete/non-solicitation agreements must meet Texas-specific requirements for such agreements and may also need to comply with the Louisiana non-competition laws. Additionally, employer should provide proper consideration in exchange for the agreements. If you think these contracts are not enforceable, check our my prior post addressing the most common misconceptions about non-compete agreements.
Learn about the security features of the document management systems and databases the company uses and turn them on. Many small businesses use Google Share Drive, Microsoft 360, Dropbox or some other similar systems to maintain and manage company records. All of those systems allow administrators to:
(1) set restrictions on which employees can access which information within the company;
(2) track what the employees do with that information when they access it;
(3) set restrictions on whether the employees can print, download, copy or share the information with other employees or people outside the company;
(4) periodically change passwords to access the systems; and
(5) turn on many other features that can help business owners prevent their information from being shared outside the company.
Additionally, many other programs, applications, CRM and ERP systems, sales databases, etc., have their own settings that restrict how the sensitive and proprietary information contained in them can be shared within and outside the company. Business owners should determine who within the company should have access to which parts of each system, limit such access on a “need-to-know” basis, and set the systems to either prevent individuals from downloading, printing, emailing or otherwise exporting the information out of the system, or alerting the company when such actions are taken. Regardless of whether a business sets the alerts or restrictions, at a minimum, each company system should keep track or log what employees are doing with respect to the sensitive information they use in the course of their work.
Additionally, a company considering purchasing a new document management systems, or an ERP, CRM, sales system or a database, should consider not only whether such software meets their business needs, but also what security measures it offers in terms of tracking and limiting access to the system by employees on a need-to-know basis.
BOTTOM LINE: Large companies can dedicate a lot of resources to protecting their trade secrets that are not available to small businesses. However, every company can implement the two steps described above. If you, as the owner of the company, do not take the time to put the proper employee agreements in place and to educate yourself about the security measures available to you and use them, the employees will know the security gaps and will be in position to exploit them when they leave or are terminated.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.