When Your New Employee Knows Too Much
Businesses have the right to protect the critical investments, information, and technology that powers their success. While employees are certainly a valuable asset, the knowledge they have about a business and its inner workings can comprise the very foundation of a business. As such, employers should take steps to create mutually beneficial and enforceable agreements that protect their intellectual property and trade secrets.
At Hendershot, Cowart & Hisey, P.C., our Houston business lawyers have extensive experience helping businesses create and enforce legal agreements and contracts that facilitate collaborative work with employees, protect their investments, and provide legal remedies in the event that an agreement is breached.
If you are a business owner who has concerns over what your employee knows, and whether that information will remain with them, you are not alone. With the increasing use of electronic communications and remote work, many employees have access to key information of their employers that is often stored or accessed from their homes. This in turn has led many businesses to reevaluate practices for protecting confidential information through a range of policies and agreements, limiting access to information, and legal remedies provided by common law and statutory protections.
Binding legal agreements between your business and employee can protect confidential information, and provide recourse in the event that an agreement is violated. These policies may include:
- Non-compete agreements – A non-compete agreement, or a covenant not to compete, requires an employee to agree to restrictions for entering into or starting similar ventures that would compete against their employer (current or former). Non-compete agreements are closely scrutinized by the court, as they may limit an employee’s opportunity to find employment. However, their duration, scope, and geographic focus can be crafted in a reasonable manner to protect legitimate business interests, and they may be customized to apply to certain employees. Because there are many strict requirements for non-competes, working with an attorney who is familiar with drafting these agreements is critical to protecting your interests.
- Confidentiality and non-disclosure agreements – Confidentiality or non-disclosure agreements (NDA) are enforceable contracts between two parties that outline confidential information, such as intellectual property and trade secrets, which both parties will share, but which will be restricted for access by third parties. Employees who sign such a contract agree to not disclose information covered in the specific agreement. Confidentiality agreements can also be used when employers do business with independent contractors or another business entity.
- Privacy and electronic communication policies – As an employer, you can create policies on electronic communication and information technology usage (i.e. e-mails and internet) that make it clear employees should not have expectations of privacy for information sent or stored on company equipment or servers. Policies can also be created to protect an employer’s right to regulate and control access to electronic communication systems, such as restricting use of company e-mail to job-related information.
These and other contractual agreements, as well as statutory law, can provide the opportunity for legal action when things don’t go as planned between employers and employees. For example, an employer may initiate legal action as a result of:
- Breach of fiduciary duty – A breach of duty occurs when an employee or another fiduciary (a person who has a duty to act in their employer’s best interest) fails to uphold their obligation. This can happen when an employee violates any legal or contractual duty or agreement, including those involving confidential information. In order for an employer to successfully navigate this legal remedy and recover damages when an employee is in breach of a fiduciary duty, they must prove several legal elements, including the existence of a fiduciary relationship, the breach of duty, and that the breach resulted in damages.
- Misappropriation of trade secrets – As with breach of fiduciary duty, misappropriation of trade secrets is a legal remedy you can take as an employer in the event that an employee obtains trade secrets (information, designs, and processes that hold value for competitors who do not have them) through dishonest or wrongful means, or when an employee provides others with confidential information. These trade secrets must provide a competitive advantage, and an employer must have taken reasonable measures in protecting them. In addition to court orders that stop specific acts (injunctive relief), an employer may also be entitled to damages.
As an employer, you face great challenges in protecting confidential information, particularly in an increasingly technological business landscape. Through creative solutions and the insight needed to address potential implications, our attorneys can help you craft programs and policies that protect your reasonable interests in accordance to the law. We can also assist with pursuing remedies in the event that agreements are violated or trade secrets are misappropriated.
If you have questions regarding protection of intellectual property and trade secrets, or wish to discuss a business law matter with a member of our team, we invite you to speak personally with a lawyer from Hendershot, Cowart & Hisey, P.C. Call (713) 909-7323 to request a consultation.