Onboarding of employees puts everyone at risk: the employee; the former employer; and the new employer.
Because a new job puts employees squarely in a position to use and disclose their former employer’s trade secrets and other confidential business information. It also places many employees in a position to trade on customer goodwill and employee relationships that they developed at their prior employer.
Yet even the most sophisticated companies and employees are often unclear about the precise boundaries of what information is protectable and what is not, which customer interactions are okay and which are not, and what can be done to help former colleagues find a job and what cannot be done.
Part of the reason for the lack of clarity is that the legal landscape itself is often quite murky, with blurred lines delineating the boundary between permissible conduct and unlawful conduct.
Not only is understanding the boundaries challenging, but the consequences of a violation can be severe. They include paying for the harm caused by the violation, as well as paying multiple damages and reimbursing the former employer’s for their attorneys’ fees.
And this is not just the employee’s responsibility.
Employers can also be held liable when a new employee violates their obligations to their former employer. For example, in addition to the damages that might flow from the violation, if the former employer’s information is incorporated into the new employer’s product, a court could prohibit the sale of the product.
If that’s not enough, misappropriation of trade secrets is not just a corporate faux pas; it’s a crime. And criminal liability can exist for both the employee and the new employer.
It is therefore crucial for employees and their new employers to take this last, best opportunity to prevent, or at least minimize, the potential problems before they arise.
How can employees and new employers limit the risks?
As mentioned previously, it starts with taking nothing when you leave your former employer. Then it gets more complicated when you start working.
Here are some examples:
- What do you do if you discover that you still have information, despite thinking you did not? Should you return it? Can you delete it?
- What if you retained nothing of your former employer’s when you left, but you remember information that you learned at your prior job — can you use what you remember to develop a new product at your new job?
- What if your new employer assigns you to work with a former customer or client, but you learned confidential information about the customer or client at your prior job that you will necessarily use to do your new job? Can you work with the customer or client?
- What if one of your former customers or clients calls you and wants to work with you, but you are contractually prohibited from working with them? Can you work with them because you didn’t initiate the contact with them, they called you? If not, can you pass them along to someone else at your new employer?
- What if a former colleague wants a job, but you have a contractual obligation that prohibits you from helping them? Can you help them? Can you even be a reference for them?
To answer these questions and many others, we’ve created a short training video (Avoiding Mistakes When You Start a New Job) covering the common makes people make when starting a new job.
The video walks through the steps to take when starting a job to help you understand and comply with your post-employment contractual obligations and obligations under applicable trade secret law and otherwise.
While following the suggestions in the video will not necessarily prevent you (or your new employer) from being sued, it will help sensitize you to the key reasons that frequently lead employers to sue their former employees (and their new employers) and some steps you can take to help reduce the likelihood of being sued.
On-boarding is your last, best opportunity to prevent potential problems before they arise. Make the most of it.
Help new employees understand and prevent problems they may not even realize they’re facing. Encourage them to watch the video.
Awareness, communication, training, and monitoring are all crucial — especially as the availability and reliability of your other tools, most notably noncompetes, is being eroded.
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On-boarding is your last, best opportunity to catch and prevent problems. But opportunity knocks only once.
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We know how hard it is to keep up with the ever-changing requirements around the country. To help, we have created the following resources (available for free):
- 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF);
- Chart of Noncompete “Low-Wage” Thresholds and Criteria (2023) (downloadable – note that some of the thresholds will be increasing and will be included in a final updated chart in January);
- Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF);
- 50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF).
- “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level; and
- Ten Minute Trade Secret Training Series, currently with three training videos and one “basics” video:
We hope you find all of these resources useful. More are coming.
And please note that we are grateful for all of the input we’ve received over the years, and welcome any suggestions for improvements that you may be willing to share.