By Robert Milligan and Joshua Salinas

California is a unique jurisdiction because of its public policy against certain employee noncompetition agreements and post-termination restrictions on employee mobility. This general prohibition against noncompetes with employees  leaves trade secret laws as the primary mechanism for employers with California based employees to protect against the unlawful use or disclosure of valuable company information and related competitive issues when key employees join competitors.

Yet many employers fall short in protecting trade secrets through the inadequate handling of employee departures.  Moreover, many companies fail to understand the potential liability that may arise with the unlawful acquisition of a competitor’s trade secrets when interviewing and onboarding a competitor’s employees.

In this first video of a two-part series, we illustrate some bad practices when interviewing a competitor’s employees, as well as handling your own employees’ departures, regarding the protection of trade secrets and other confidential information.  During the video, a prospective candidate offers to share during his employment interview his current employer’s trade secrets regarding sensitive business and customer information for the Southern California market.

When watching the video below, consider the following:

  • What concerns do you have about anything the interviewer did?
  • What concerns about what the prospective employee did?
  • How about the current employer?
  • What type of policies and procedures could both the current employer and prospective employer put in place to better protect themselves?

The Interviewer

  • Fails to steer the interview away from customer specifics and potential trade secrets toward the employee’s general skills and knowledge
  • Encourages the employee to start in a mere 4 days
  • Tells the employee to “give a shout out to his customers”
  • Does not press the employee for copies of his previous agreements
  • Encourages the employee to solicit fellow employees

The Applicant

  • Offers to announce his move to customers before leaving his old job
  • Shares specific confidential information about customers
  • Plans to leave his old job with little to no notice
  • Announces that he will bring his old employer’s materials along with him in order to “hit the ground running”
  • Hopes to bring the “OC franchisor team” with him to his new job
  • Takes company property, including hard copy, electronic files, and USB devices
  • Encourages other employees to join him at competitor despite non-solicitation covenant
  • Uses social media and cloud storage to transfer company data

The Applicant’s Current Employer

  • Failed to create “culture of confidentiality”
  • Allows employee to clean out office without HR present and take material without reviewing content
  • Fails to conduct an exit interview
  • Authorizes wiping of employee’s computer which may destroy evidence that the employee forwarded files and customer contacts to his personal e-mail account
  • Generally appears unconcerned about the abrupt and unexpected departure of an employee who had access to confidential and trade secret information

Stay tuned for part two of this series where we illustrate the best practices to protect company trade secrets when employees depart, and best practices for avoiding liability when interviewing and onboarding a competitor’s employees.