Protecting Your Company Data During Layoffs

One of the most perilous times for a company in an employment relationship is when a worker is leaving. Departing employees have taken customer lists, vendor lists and sometimes company secrets on the way out the door, whether they were laid off, fired or quit on their own.

This unethical, and sometimes illegal, time-honored tradition has been made all the easier in the digital age with a trove of data easily e-mailed, uploaded to the cloud or downloaded on a thumb drive.

Minimizing the risk of laid-off or leaving employees absconding with sensitive company data requires planning between management and your legal counsel. There are a number of measures you can employ to preserve the value of your intellectual property and other important company proprietary information, such as:

Having employees sign non-solicitation agreements – In many states, non-solicitation agreements are enforceable. Such agreements often address the protection of proprietary, confidential information, like a list of customers and suppliers.

If a non-solicitation agreement is crafted properly, it can serve as a strong measure preventing departing employees from soliciting a former employer’s customers and suppliers at their next place of employment.

Using non-disclosure agreements -If you have company data that competitors could use to the detriment of your business, it would be wise to require your staff to sign non-disclosure agreements, which hold employees to their fiduciary obligations under law.

A typical non-disclosure agreement identifies the employer’s proprietary and confidential information and requires the employee to acknowledge the value of preserving the secrecy of such information. The agreement requires that the employee keep such information secret for a certain period of time.

Before writing up a non-disclosure agreement, management and legal counsel need to take an inventory of all the data the employer wants to protect. In order to be enforceable, a non-disclosure agreement must be supported by “adequate consideration” (which means evidence of employment, such as the payment of a wage for the employee’s services).

Requiring the return or destruction of property – Before employees leave your employ, make sure that they have returned all of the company’s property, particularly any items that contain confidential information. That may include laptops, originals and any copies of company documents that the employee has made.

Also make sure that company information, electronic files or other information stored on the employee’s personal or home computer is deleted.

Changing or deleting access codes, passwords – To make sure that a former employee does not access sensitive company data, you should change or eliminate any access codes, passwords for company e-mail, voicemail, telephone conference lines and computer systems, or access to your facilities via doors with coded locks.

Also collect any company ID cards. If you have concerns you can also notify customers, suppliers and others that the employee no longer works for you.

Making an exit record – Make sure you have a record (a checklist, for example) of the measures required of departing employees. This checklist will confirm that each departing employee has complied with your measures.

Also, have each departing employee sign an acknowledgment that all of the company’s property has been returned or destroyed, and that they have read, understood and agree to be bound by their ongoing obligations under their non-disclosure and non-solicitation agreements.

Conducting exit interviews – The final thing you should do is conduct a formal exit interview with each departing employee. During the exit interview, try to ascertain the confidential information known to the departing employee and ensure that all records of that information have been returned.

This is the time to remind the employee about their obligations under the non-disclosure agreement and the ramifications of violating the agreement either directly by disclosure or indirectly by performing work for other employers or for themselves that requires use of this confidential information.

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