How can your company protect confidential information when an employee leaves?

There are a number of ways Wisconsin companies can protect their confidential information in the event an employee leaves. These generally fall into the following categories: statutory trade secrets protections, contractual protections (such as confidentiality agreements), and certain best practices that may be used to quickly identify whether information has been taken by a departing employee, which potentially allows for the quick recovery of such information.

However, if the company waits to take any steps before a departure event, it is generally too late to use many of the protections that could have been in place with some preplanning and action.

Means of protection: By statute, Wisconsin law protects a company’s trade secrets from unauthorized use or disclosure. A “trade secret” is generally defined as information (including data, a compilation, a method, etc.) that derives independent economic value from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use. To be a trade secret, the information must be subject to reasonable efforts to maintain its secrecy. If a departing employee takes a company’s trade secrets, the trade secrets law allows for injunctive relief, damages, and the recovery of attorney’s fees.

Whether they realize it or not, all companies have trade secrets. That is, they have inherently valuable information that their competitors do not know, cannot easily ascertain, and would value. However, if the company has not taken reasonable efforts to maintain the secrecy of this information, it will not be entitled to the protections of the law. What constitutes reasonable efforts depends upon the facts but may include: use of confidentiality/nondisclosure agreements, security precautions (locks, passwords, badges, etc.), passwords, and limiting use or disclosure to only those employees with a “need to know.”

Best practice recommendation No. 1: Companies should create an inventory of their trade secrets information and implement reasonable measures to protect its secrecy.

Wisconsin companies can also protect their confidential information by requiring employees to enter into confidentiality/nondisclosure agreements with the company. Such agreements must be reasonable as to the scope of the information protected and as to the length of the restriction in order to be enforceable under Wisconsin’s Restrictive Covenant Statute. They must also be supported by consideration.

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Best practice recommendation No. 2: Analyze whether the company should require confidentiality/nondisclosure agreements from all employees who have access or are exposed to confidential information of the company. Consult with counsel to draft reasonable and enforceable agreements, and determine what consideration may be utilized to support the agreement.

Finally, companies should adopt practices that will allow the company to quickly identify whether a departing employee has taken the company’s information upon departure. Again, such practices depend upon the facts, but the company should consider, among other things: whether it should preserve email or other data that may be periodically and automatically deleted, unless such scheduled deletions are suspended; whether remote access, print, and other logins may be determined and preserved; and whether the employee’s laptop/desktop should be examined, forensically, to ultimately look for third-party device connections, deletions, transfers, printing activities, and remote-access activities.

Best practice recommendation No. 3: If the company decides to examine a departing employee’s laptop or desktop, it should not even turn on the computer (because this can spoil forensic information). Rather, the company should engage a forensic expert to make a forensic image of the device, which may then be examined for evidence of “bad behavior” by the departing employee.

Amy Bruchs is a partner at Michael Best & Friedrich LLP working primarily in the employment, labor, and litigation areas, with emphasis in employment and labor litigation.

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