6 Strategies for Managing Unfair Competition from Former Employees

Protecting trade secrets and proprietary information helps to keep companies competitive. Some employers assume their employees will always be honest, loyal workers and just ignore the risks associated with losing control of trade secrets, but that’s a mistake. Former employees who have had access to proprietary information during their employment at the company pose a serious risk that must be managed appropriately. Read on to find out about six strategies for minimizing risk.

1. Have All Employees Sign Non-Competition and Non-Disclosure Agreements

Legally binding non-competition and non-disclosure agreements help to protect employers against theft of trade secrets and proprietary information even after an employee’s contract is terminated. Hire a san antonio attorney to help draft the agreements to ensure that it will be legally binding.

Since most employers hire employees on an at-will basis, non-competition agreements don’t always hold up in court. They lack consideratio, meaning there was no valuable exchange between the parties. If a former at-will employee violates his or her non-competition agreement, the court may find he or she was under no legally enforceable obligation to withhold trade secrets. To avoid this problem, employers must cite not just employment as consideration, but also some additional benefit such as a small lump-sum signing bonus.

2. Implement Strong Company Policies

Even if they have both non-compete and non-disclosure agreements in place, it’s still wise for employers to implement strong company policies concerning computer use and access to confidential information. This helps to prevent current employees from stealing trade secrets they could later use to their advantage after the termination of their contracts.

Company policies should clarify that company-issued computers, software, mobile devices, and email accounts are owned exclusively by the company. They should also stipulate that the information found on these devices is owned exclusively by the company and it retains the right to access and monitor devices used by employees. This will not only help to prevent information theft but will also ensure law enforcement officers can access the information without a warrant if a former employee does attempt to use company secrets to his or her advantage.

Companies should also define their confidentiality policies. These should clearly define employees’ obligations to keep trade secrets to themselves. All new hires should be required to sign an acknowledgement that they have received a copy of confidentiality policies and other company policies and have agreed to comply with them.

3. Limit Access to Trade Secrets

Former employees can’t exploit the information they’ve never had access to, and most employees don’t need access to sensitive information. Instead, companies should only offer access to the data and information each employee requires to perform his or her work. That goes not just for different positions within the company but also for different geographical areas.

All employees, regardless of their access levels, should be assigned unique usernames and passwords, which should be required to access any sensitive information. This lets the IT team monitor what data employees access and how they use it. Implementing permission procedures makes it much more difficult for current and former employees to misappropriate information and provide valuable evidence in the event that a former employee does breach his or her non-disclosure or non-compete agreement and attempts to use trade secrets to his or her own advantage.

4. Provide Training on How to Implement Protocols

Just having new hires sign non-compete and non-disclosure agreements then having them acknowledge the receipt of company policies isn’t enough. Employees who handle or create sensitive files should also receive training on how to implement confidentiality protocols. This includes simple things like adding a “Confidential Information” stamp to documents or files that contain proprietary data as well as training on how to password protect internal and external documents.

Providing ongoing training on security protocols is a great way to ensure that all mid- and high-level employees receive periodic reminders of how they should be handling sensitive information, which helps to ensure that it won’t fall into the wrong hands. It also creates a company culture in which all workers know how valuable proprietary information is and treat it accordingly. That way, if one person has malicious intent, he or she will be less likely to gain access to proprietary information while in the company’s employ.

5. Perform Periodic Audits

It’s a good idea for all companies to schedule annual audits. If they have internal security teams, these professionals can usually perform the audits. Otherwise, companies can hire an outside consultant to check the system and ensure that it is protected against employee espionage and trade secret theft.

Audits usually include several steps. They identify potential trade secrets, proprietary information, and sensitive data that could be targeted They also review the company’s policies, protocols, legal agreements, and access levels. A yearly review of the comprehensive strategies the company has in place for protecting sensitive information can help to identify potential weak spots and give business owners the chance to implement mitigation strategies.

6. Treat Employees Well

Finally, employers should go out of their way to reduce the chances of information theft by treating their employees well. Employees who receive adequate pay and benefits and are treated with respect will be less likely to move on to another company. Even if they do get hired on by a competitor, former employees will be less likely to risk their reputations and the potential for legal action by releasing trade secrets if they feel that they were treated with respect at their former positions.

The Bottom Line

There’s no way to reduce the risk of trade secret theft to zero, but companies that have robust information security protocols and policies in place and create a culture that values information security will be less likely to wind up dealing with unfair competition from former employees. It’s also important to have all agreements signed by new hires and existing employees reviewed by an attorney to ensure that they will be legally binding. Beyond that, risk mitigation strategies largely consist of providing ongoing training and treating employees well to reduce the chances of information leaks.