Don’t Let Your Secrets Leave With Your Employees: How To Protect Your Trade Secrets When Team Members Depart

By Pantea I. Fozouni

March 4, 2024

Trade secrets

Congratulations on building a successful business! You've poured your time, energy, and resources into developing products or services, along with the systems and strategies that drive them forward. But what happens when a key employee or contractor announces their departure?

You depend on your team members to learn your business, your systems, and the inner workings that keep your business a step ahead of the competition. But how do you protect your business secrets when a team member leaves? How do you ensure that the hard work you've invested in your business remains protected?

This week we explore essential strategies for safeguarding your business's trade secrets whether you’re hiring a new team member or saying goodbye to a company veteran.

The Power of Confidentiality Clauses

One of the first lines of defense against the potential loss of trade secrets is a confidentiality clause in your hiring agreement. This agreement mandates that certain information must be kept strictly confidential during employment and beyond, and should be signed by every new hire, whether you’re hiring a W-2 employee or an independent contractor.

 By clearly outlining what constitutes a trade secret, you create a legal framework for protecting sensitive information from disclosure or misuse. Whether it's proprietary processes, customer lists, or innovative technologies, a well-crafted confidentiality clause lays the groundwork for safeguarding your business's intellectual property.

Harnessing the Strength of Non-Compete Clauses

In situations where a key team member intends to compete with your business or join a competitor, a non-compete clause can provide a valuable layer of protection. This clause prohibits the team member from engaging in competitive activities within a specified geographic area and for a defined period after leaving your company.

As with a confidentiality agreement, a non-compete clause should be included in your hiring agreement and company policies from the get-go. If a former team member starts working for a competitor too close to your business or too soon, a non-compete clause gives you the legal ability to file a lawsuit against your former team member for breaching the agreement.

Enforcing a non-compete agreement mitigates the risk of losing valuable trade secrets to competitors and maintains your competitive edge in the market. If suing a former team member seems extreme, even just having the clause in place (and, if need be, having your attorney send a letter reminding them of the agreement) can be enough to dissuade them from competing against your company.

Proactive Measures Before Departure

Before a key team member departs, it's essential to take proactive steps to protect your business's interests. Start by assessing whether you want to retain the team member and address any underlying issues that may have prompted their departure. If the team member is a valuable contributor to your company, try discussing ways to remedy the reasons for their departure, such as a better salary, benefits, or increased responsibilities.

If the team member is set on leaving or you aren’t compelled to keep them onboard, review any existing agreements with the team member before their last day, clearly outlining your expectations regarding confidentiality and non-competition. Additionally, identify the employee's destination, especially if they plan to join a competitor, and notify the competitor of your concerns and your intent to enforce any applicable agreements. 

No one likes legal trouble, so letting the competitor company know you have a non-compete agreement in place with your former team member can be a proactive way to ensure your team member isn’t involved in any projects or roles at their new workplace that would pose a risk to your trade secrets.

Preparing for Legal Action

If preventive measures fail to deter the unauthorized disclosure or use of trade secrets, you may need to resort to legal action to protect your business's interests. To succeed in court, you must demonstrate that you took reasonable measures to safeguard your trade secrets. This underscores the importance of having well-drafted agreements in place from the outset.

That’s why our focus is on keeping you out of court and out of conflict to begin with by proactively looking for weak points in your company’s structures, anticipating issues before they happen, and building comprehensive agreements and systems to protect you and your business at every stage.

Protecting and Support Your Business Through Every Stage

Navigating transitions in your business, particularly when key employees depart, can be challenging. However, with the right strategies in place, you can reduce risks and protect your business's trade secrets and intellectual property. We specialize in helping businesses like yours build their Legal, Insurance, Financial, and Tax systems with confidence.

Through our LIFT Business Breakthrough Session, we work with you to identify areas of your company that leave you vulnerable and build a strong foundation for your company’s growth. Even if you think your company is already on strong footing, you may be surprised by what we find during the Session.

To learn more about our LIFT Business Breakthrough Session and how we can help protect your business’s trade secrets and more, give us a call. We’re here to support your business at every stage.

This article is a service of a Personal Family Lawyer®. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices with your business throughout life and in the event of your death. We also offer a LIFT Business Breakthrough Session™, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

Skip to content