As business owners and employers, we all expect to have “Gruntled” employees forever, but in reality, someone will likely leave their position unhappy, carrying the power to harm your business or solicit your clients at some point in the future. From the perspective of an HR Services firm, it happens more often then you think. Ask yourself, are you absolutely confident that current or former employees wouldn’t consider misappropriating internal company data, or attempt to benefit from the competitive information gained during their employment with you? If the answer is no, read on.
Its likely that you have information that could be valuable to someone, somewhere, and your employees have access to that information. Consider your internal financial data, client lists, employee lists, internal processes, recipes and product secrets. There are specific things you can do to protect this proprietary information but caution is advised. Missteps can dilute the power of your protection or get you in legal hot water. You should take time out to think about these issues now, or certainly before you hire your next employee, and then take the steps necessary to protect your assets.
Protect the Disclosure of Your Sensitive Corporate Information
A properly written Confidentiality Agreement, or Non-Disclosure Agreement can be used used to protect trade secrets and other proprietary information. A Confidentiality Agreement generally requires the named party agree to treat certain corporate information (as specifically set forth in the agreement) as confidential and prohibit that party from personally using or disclosing such information to third parties. Keep in mind, there is a limit to the amount of time you can bind the party to the terms of the agreement, typically during the course of employment and 2-3 years after separation. Its always wise to protect company secrets internally but this agreement can deter inappropriate disclosure and make it easier to pursue employees or former employees that decide to divulge sensitive information.
Prevent the Solicitation Clients and Employees
Protecting your employees and clients is possible through the use of a Non-Solicitation Agreements. A Non-Solicitation Agreement typically prohibits the party named from directly or indirectly soliciting customers and company employees in ways that would directly compete with your business. While the courts are not entirely in support of the Non-Solicitation Agreement, with proper wording, and in the defense of provable trade secrets, it can be effective in keeping former employees from raiding your clients and employees to build their own competing business or benefit their new employer. A Non-Solicitation Agreement is much more powerful when combined with a Non-Disclosure or Confidentiality Agreement. With both, the legal restraints on using confidential information should give you the power to prevent a former employee from contacting clients or employees for business purposes.
What about using a Non-Compete Agreement?
A Non-Compete Agreement is a contract that generally states that an employee, former business partner, or former business owner will not engage in the same type of business as the employer, or former business partner or owner in which the individual had an ownership interest for a specific period of time. Despite being very desirable, these agreements are typically illegal and invalid in the state of California unless the non-compete clause is part of the sale or dissolution of a corporation, limited liability company, or partnership.
Its best to avoid any use of Non-Competes, a judge could throw out any accompanying Non-Solicitation or Non-Disclosure agreements if you try and pursue the provisions of the Non-Compete.
Caution Advised
Many employment contracts and severance agreements, especially those downloaded from the internet or picked up off the shelf at an office supply store, may included clauses that are not legal in California or may not withstand legal scrutiny. It is advised that you avoid use of such agreements, unless you plan to spend some serious money defending a lawsuit for wrongful termination or unfair interference with business. Its best to get wise legal and HR advice when looking to protect your company’s client list and confidential information. Contact Champion if you need more information.