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Restrictive Covenants and Trade Secret Considerations for a Remote Workforce: 9 Key Takeaways
By Caroline Paillou on March 2, 2021 at 2:30 PM

As many employers continue to deal with the prospect of a more remote workforce moving forward, what are the best practices related to restrictive covenants, information privacy, employee onboarding, and protecting trade secrets? Greensfelder attorneys Jim Ferrick, Jill Luft and Chris Pickett recently presented “Restrictive Covenants and Trade Secret Considerations for a Remote Workforce” for the St. Louis chapter of the Association for Corporate Counsel, covering steps to protect confidential business information. Here are nine key takeaways from their discussion.

  1. What constitutes a trade secret varies from state to state. In addition to the definition of trade secret contained in the Federal Defend Trade Secrets Act, most states have their own statutory definition.  Further, there are potential important differences in how different states interpret and enforce trade secret protections.  For example, Illinois courts recognize memorization of a trade secret as a misappropriation – such as memorizing customer lists.
  2. One way to protect confidential information and trade secrets is to implement written policies. These should describe the confidential information, explain the steps the company will take to secure the confidentiality of the information or trade secret, and set expectations for employees and possible consequences for misconduct.
  3. Restrictive covenants and confidentiality agreements are another tool to protect your confidential information. A restrictive covenant (such as a non-compete or non-solicit agreement) is a contract provision that does exactly what it says — limits former employees’ activities at new employers. A confidentiality agreement restricts an employee from disclosing trade secrets and/or confidential information of a former employer. Non-compete restrictions may be related to either geography or customer base. Accordingly, agreements may need to be updated to cover new locations/territories/job responsibilities for employees now working from home.
  4. Be aware of tricky situations employees may face at home. Family members may be within earshot of private work-related conversations. Also, printing confidential documents may be a consideration. And think about “smart” devices: Best practice is to avoid having calls or video meetings where you discuss confidential information in the presence of Alexa, Siri, etc.
  5. When onboarding employees, educate employees about trade secrets and limit which employees have access to that information. A guiding principle: only give as much access as necessary for the employee to properly perform the job. Other steps are requiring written agreements with restrictive covenants and addressing restrictive covenants with prior employers and with your company at the outset. Addressing these matters head on can help avoid claims by a third party that your new employee has misappropriated their trade secrets on the front end, and you can preserve your company's trade secrets on the back end.
  6. Consider implementing policies or written agreements to protect confidential information that finds its way onto employees’ personal devices used for work purposes. Another consideration for protecting information is issuing remote work agreements that set forth expectations for remote employees. It also may be possible to use technology solutions to protect information, such as working in a closed environment that restricts the ability to download, print or email information or phone clients from a personal device.
  7. When employment ends, remind the employee of confidentiality obligations and restrictive covenants in writing and provide a copy of any agreements. In addition to the reminder, collect all company property and promptly discontinue the employee’s access to all electronic systems (internal and external), and require the employee to delete all company confidential information from personal devices.
  8. In court, the trend during the pandemic seems to be in favor of the individuals whose former employers are seeking to enjoin them from going to work for a competitor. The ongoing crisis has made preliminary injunctive relief more elusive, as courts are typically less willing to restrain employees from competitive employment during economic downturns, particularly if the employee has been let go without cause.
  9. Courts, though, are ruling in favor of employers if the former employees have taken employer’s trade secrets. Courts still seem willing to issue injunctive relief remedying violations of confidentiality and trade secret disclosure restrictions, recognizing that the urgency of preventing the misappropriation of trade secrets remains.
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