Protecting Your Business When an Employee Leaves

Protecting Your Business When an Employee Leaves

While it would be ideal for a company to never have employee turnover, the reality is that it happens all the time. As a business owner, if you have an employee who is leaving but will continue to work in the same field as your business, it is imperative that you have in place protection for your company. A former employee may leave with trade secrets or customer lists that can negatively impact your business.

Pennsylvania Uniform Trade Secrets Act

Pennsylvania is one of the many states that have adopted the Uniform Trade Secrets Act (Act). The Act provides protection for businesses from having their trade secrets improperly taken and disclosed by former employees. Further, client lists are usually considered trade secrets for purposes of the Act. Specifically, under Pennsylvania law, trade secrets include a customer list that:

  1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
  2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

If a person has taken a trade secret, a business may file a lawsuit for injunctive relief, damages, and attorney’s fees. If the court grants injunctive relief, it will order the defendant to stop violating the plaintiff’s rights and to take steps to preserve the secrecy of the plaintiff’s information.

A court may also order the defendant to pay damages to the plaintiff for the economic harm caused by the taking of the trade secrets. If the court determines that the defendant acted willfully or maliciously, it may award punitive damages in an amount up to twice the actual damages. The court may also order the defendant to pay the plaintiff’s attorney fees if it finds the defendant acted willfully or maliciously.

Require Employees to Sign Agreements

A business can also take steps itself in an attempt to keep former employees from taking trade secrets and client lists. One way is to have employees sign a proprietary information agreement. Under these, the employee agrees to several things, such as that they will return all company property and will not disclose trade secrets upon leaving the company.

Requiring an employee to sign a non-solicitation agreement can also provide protection. These agreements state that the employee will not contact the firm’s customers or clients for a specified period of time after leaving the company.

If you have these agreements in place, it is also important to conduct an exit interview before an employee leaves. During this meeting, you should remind the employee of any agreements they entered into and that they cannot take and disclose trade secrets with them.

Get Help Protecting Your Business

As your business begins to grow, different risks threaten your company. Losing clients or trade secrets when employees leave not only hurts your business, it benefits competitors. At the Philadelphia Small Business Law Center, we can help you protect your company when employees leave. If you have any questions, please contact us today.

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