An Employer’s Legal Rights When An Employee With First-Hand IP Knowledge Quits

Many employers hold vast amounts of intellectual property they would do anything to protect. Sooner or later, employees with potentially damaging knowledge of the IP will quit or retire, opening the door for other companies to hire them. Are they legally obligated to keep your trade secrets close to the chest? Can they divulge information not considered intellectual property? What legal rights do employers have in these situations?

The best defense is a good offense, or so they say. In IP law, that means creating contractual obligations for new hires to prevent them from finding a competitor or jumping ship within a certain timeframe. The law allows employers to do this. For example, a business contract might stipulate that an employee with intimate knowledge of IP cannot gain employment with a competitor for several months or years after a contract ends — whether that end is voluntary or not.

A lawyer with employment firm said, “It’s necessary for most employers with significant IP assets to ask employees to sign NDAs in order to prohibit the sharing of trade secrets. This might make litigation easier when those secrets are divulged, but even without the NDAs, this type of activity is both unprofessional and unlawful. Sharing classified information can put someone in legal hot water, but it can also guarantee no one else wants to hire them in the future. Trust is tantamount for employers with IP, and you never trust a poached employee or someone who gave up his last company’s secrets.”

An equally large concern is what to do when an employee leaves one company to start their own. This can be quite hectic when the employer finds out, especially if the employee in question plans to be a competitor. This is because the soon-to-be-former employer will have learned a lot while employed at your company. Rest assured that any trade secrets, trademarks, and confidential information is still protected legally. But it’s important to keep in mind that general information derived from training is not. 

The employee might plan to take clients to the new company, which may or may not be a breach of the law. The employee cannot take client information or use the email for the old company to steal clients. This means all communication must be done outside of work and using only information available elsewhere. That’s why it’s so important for businesses using IP to keep communications and important data at a brick and mortar location — especially during these uncertain times, when many employees have started to telecommute to work. Virtual employment is a bad idea for most companies who have a vested interest in certain types of information.

When in doubt, contact a specialized IP, business, or employment lawyer. These individuals can help shed light on the details of your contracts or expose someone else’s liability where none was obvious. You might have incurred financial damages when your employee left the company, and you deserve compensation for those losses.

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