How to Protect Your Company Lists and Trade Secrets

Most senior and middle level managers will understand when a subordinate comes to them to resign and begin a new business. But all will immediately question whether the new business will compete in any way with their enterprise, and react to the future entrepreneur in either of two very distinct ways based upon those fears.

Even more suspicious is the action of an employee who resigns suddenly without notice or explanation. It is natural to worry over whether that person is off on a journey to a competitor.

If the employee who is about to resign tells you that he or she is off to conquer the world in a completely new arena, there is almost always the unspoken sigh of relief and a cooperative attitude that flows from that point on in the conversation.

But if the departing employee is even a little bit reticent to tell of his or her plans, the result is the first stage of what could become an outright war between you and a newly separated past employee, sent away that day with an escort out the door.

You can expect to have the same attitude if a past employee resurfaces after a layoff, resignation or after being fired, with a plan for a competitive business—or as an employee of a competitor. Most employers have all their employees sign non-disclosure and confidentiality agreements to protect the company’s trade secrets, customer lists and business plans. Many states recognize the right of a former employee to work, even if in direct competition with a past employer. But that right clearly stops when the entrepreneur uses any trade secret data from the past employer, especially customer lists for contacts and confidential business plans.

Anyone can be sued even if without merit, and responding to a suit can be traumatic in many ways—from expenditure of cash and valuable time to emotional drain from worry over a negative outcome, to loss of industry goodwill by an entrepreneur perceived to have stepped over the line.

This is especially true for someone who has sold a business only to surface later to compete in some way with the buyer. Never underestimate the venomous response from such a threat.

So, here’s the obvious advice to give to departing employees. “No matter what your circumstance, never, ever be guilty of using trade secret materials or ideas from your past employer, especially customer lists.”