The employer’s perfect checklist to prevent loss of electronically-stored information

A look at the preventive measures you can take to keep important information in house

It is the electronic age, and businesses rely more and more on electronic storage devices to house their company’s most valuable assets. Increasingly, businesses find themselves the victims of departing employees who decide to take their company’s most valuable information with them, in the hope of embarking on a promising new career with a competitor.

Fortunately, there are a number of preventive measures you can take to avoid such a situation.

Preventive measures

Use confidentiality and non-compete agreements: Employees who have access to a business’s trade secrets should be required to sign a confidentiality agreement and, depending on their position, a non-compete agreement. You should regularly review these agreements to make sure that they conform to the most current law on the subject, since courts frequently issue opinions in this area.

Policies: Include a confidentiality policy in the employee handbook. Also, implement a policy making clear that you may monitor employee use of the Internet and email. This will abrogate any privacy claims, should you ever suspect an employee of inappropriately accessing confidential information and monitor their company communications to document it.

Identify and protect the business’s trade secrets and other confidential information: All too often, businesses do not bother to identify their trade secrets or other confidential information, or take the simplest steps to protect these items. They may even assume that an employee knows what information the business considers confidential or a trade secret. This is not necessarily the case. Identify the information the business considers confidential or a trade secret and protect it by (1) specifically identifying for employees what material is confidential and what material constitutes a trade secret, (2) marking the material “confidential” or “proprietary – confidential,” (3) advising employees that the information is to remain confidential, and (4) restricting access to the information with locks and passwords.

Impart the importance of vigilance: Conduct regular employee and contractor training on the importance of maintaining in confidence trade secrets and other confidential information, and the duty each employee has in this regard. Employees should not just focus on policing their own conduct but should be mindful and aware of the conduct of those around them — including the conduct of co-workers, supervisors, and customers. Document the training provided to employees.

Risk reduction upon separation

When an employee with access to a business’s trade secrets resigns, there are a number of steps the business can take to reduce the likelihood that the employee will take company information with them.

Thorough interview: When an employee resigns, conduct a thorough interview. Ask the employee about their new employer and their new position. Inquire into the products the employee will be working with and the territories that the employee will be serving.

Remind the employee about their obligations: Sometimes, the employee truly did not intend to do anything sinister; they just wanted to take certain information to make themselves appear knowledgeable to their new employer. Obviously, such behavior still threatens the business. Accordingly, advise departing employees that they may not take any company information or documents (electronically stored or otherwise) with them upon departure, whether it seems harmless or not. Warn employees that the company will pursue both civil and criminal remedies in such an event so that the employee understands the severity of the situation. Finally, provide the departing employee with a copy of any confidentiality or non-compete agreement to which they are a party.

Return property and verify in writing: Ask the employee to return all company property and information, including laptops, jump drives, disks, documents, and electronically stored information. Specifically ask the employee if they have any company information saved on a disk or stored electronically. Ask the employee to verify in writing that they have returned all company property.

What to do when suspicious

If you suspect that a departing employee has taken confidential information, here are some precautionary steps you should consider taking:

Let the employee go immediately: Make the employee’s resignation effective immediately. Escort the employee back to their desk to collect their belongings and then out the door.

Handling of their computer: Get the employee’s company-issued computer or hard drive to a computer-forensic expert. Do not give the laptop to your information technology department for analysis. Information technology personnel can inadvertently destroy important metadata.

Chain of custody: Keep a log of the persons who have contact with the employee’s computer. This will assist you in later establishing its chain of custody, should the computer become evidence.

Seek confirmation: Send a letter, asking the employee for confirmation that (1) they intend to abide by the terms and conditions of any non-compete or confidentiality agreement and (2) they did not take anything with them upon their departure. If the employee does not respond, send a second letter and consider copying their new employer (but be careful in drafting such a letter so as to avoid exposing the business to a tortious interference claim).

Conduct employee interviews: Conduct employee interviews to determine what your employees know about the potential theft of trade secrets or other confidential information.

Legal remedies

In the event your client’s confidential information or trade secrets have been stolen by a departing employee, immediately seek an injunction. The more you delay in seeking injunctive relief, the less likely a court will be to grant it. Consider seeking expedited discovery, including the production of any personal computer, hard drive, or electronic storage device in the employee’s possession or control. Requests for admission can be helpful too. Employees often refuse to acknowledge any wrongdoing at first. If they deny a request for admission, asking them to admit that they took company property early on, this can be an avenue to recover significant attorney and expert fees down the road, if you later prove their statement to be false.

Taking these preventive measures and steps should put the business in the best position possible in the event of ensuing litigation.

Contributing Author

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Natalie Remington

Natalie Remington practices in the Commercial Litigation Group at Quarles & Brady LLP. She has represented clients in all stages of litigation spanning from...

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Contributing Author

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Nicole Druckrey

Nicole Druckrey practices in Quarles & Brady LLP’s Commercial Litigation Group and serves as chair of the firm’s Trade Secrets and Unfair Competition Team....

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