Arguably one of the biggest changes has been the unprecedented manner in which millions of Americans have quit their jobs in search of new career opportunities that offer greater flexibility, improved work-life balance, higher pay and increased opportunity for advancement.
The times they are a-changin’—and it’s beginning to look like things may never go back to the same way they were pre-pandemic. Indeed, COVID-19 has materially affected just about every aspect of our lives. Arguably one of the biggest changes has been the unprecedented manner in which millions of Americans have quit their jobs in search of new career opportunities that offer greater flexibility, improved work-life balance, higher pay and increased opportunity for advancement. In some cases, these individuals are resigning from their jobs by way of email from home, without even the courtesy of providing the traditional two-weeks’ notice.
This phenomenon, coined the “Great Resignation,” continues to endure even after the precipitous decline in infection and mortality rates, with nearly 4.3 million people quitting their jobs in January alone, according to the March 9 U.S. Department of Labor, Job Openings and Labor Turnover Report. Many of these departing employees were privy to trade secrets that are now at risk of being disclosed to competitors, and the traditional protections may not cover the novel employment arrangements in this new normal.
These recent developments pose a myriad of legal issues that will no doubt give way to a wave of litigation as former employees may be sharing trade secrets with their new employers, violating non-compete agreements, or taking with them corporate intelligence that belongs to their ex-employer. Here are some basic tips to help protect corporate interests from departing employees and mitigate liability related to the hiring of new employees.
- Take inventory of what assets are worthy of protecting and determine what measures are necessary to keep them secure.
In order to devise an effective strategy for navigating the challenges created by the Great Resignation, it is essential to first conduct an audit of what trade secrets warrant protection, and then perform a comprehensive risk analysis to identify any and all threats to these assets. This should include:
- an evaluation of what proprietary and trade secret information the company maintains and relies upon that provides it with a competitive advantage;
- who in the organization has/had access to this information and through what means;
- what measures are in place to prevent unauthorized access to, and/or wrongful disclosure of, this information by current and former employees; and
- what security gaps or weaknesses exist that must be corrected.
The results of this exercise, which should be performed by a group of high-level stakeholders from every department of the organization, can serve as a helpful guide in preparing a roadmap to achieve the company’s human resource and information management objectives.
- Restrictive covenant agreements are a good start, but may not be enough.
Historically speaking, some of the strongest tools that companies have had at their disposal in managing employee turnover and safeguarding its trade secrets are their use of restrictive covenants such as noncompete and nondisclosure agreements. Noncompetes, however, which are required to be reasonably limited in time, geographic location, and line of business, may no longer sufficiently cover work-from-home employees who now have the ability to work for companies all over the world—from anywhere in the world.
Employers should review any active non-compete agreements entered into pre-pandemic with their legal counsel and assess whether any amendments need to be made. For example, consider a greater emphasis on restrictions against working for explicitly named competitors, as opposed to a blanket restriction by industry in a limited specific geographical area.
If used properly these can be extremely helpful as both a prophylactic measure and as a tool of enforcement. For this reason, companies would be wise to audit their records and ensure that all employees who have access to trade secrets have signed non-disclosure and non-compete agreements on file. It may also be helpful to remind departing employees of their legal obligations and even send a courtesy copy of their agreement(s) to their new employers to put them on notice.
On the other side of the coin, to avoid stepping on this proverbial landmine HR departments should add a question to their standard employment application asking whether the candidate is bound by any restrictive covenants. If the answer is yes, then further investigation is required before hiring. If they answer no, and it turns out they actually were bound by an agreement, it at least gives the company a viable defense against willful infringement.
Until the law catches up with the new reality of how people work, companies will have to lean on their IT team to implement additional security measures to mitigate the risks that HR policies and procedures cannot.
- It is high time for IT to have a seat at the table.
Technology has been one of the greatest blessings during the pandemic, allowing for people to continue making a living from home, thereby keeping businesses running and preventing an economic collapse. Fortunately, it has also given employers new tools for safeguarding their trade secrets.
The implementation of VPN software, utilizing virtual data rooms, and requiring employees to log in through a secure portal to access the network, all have certainly been helpful. So too have restrictions against using USB thumb drives and limitations on printing. But it’s the mandatory computer and mobile device monitoring programs that track everything the employee does, and notifies the organization when certain documents or folders are accessed, that have provided the strongest protections.
As we come out of the pandemic and inflation continues to rise, corporations will need to be vigilant if employees continue resigning at this record pace. While I can’t predict the future, I do expect to see an increase in litigation.
Jordan Isrow is a partner at Government Law Group in Fort Lauderdale, Florida. He focuses his practice on complex litigation, corporate counseling and representation of governmental entities.