Protecting Against Competition by Former Employees Requires Advance Planning

Protecting information that makes a business successful is a central part of every company’s plan. Employees are never permanent fixtures, and fewer work long-term than they used to. It’s wise, then, to anticipate that they will depart at some point and protect business interests through well-crafted confidentiality and/or noncompetition agreements. The damages that can otherwise flow from an employee’s move to a competitor can undermine profitability or, in some cases, even threaten a company’s survival.

Preventing problems like those requires advance planning. A good place to start is with organization. Businesses must understand the types of information to safeguard and be certain to control how that data is stored, how it’s used, and who has access to it. It’s common to protect pricing material; customer lists; product plans; customer purchase and sales histories; marketing information; and other information that is central to business success. Companies should ensure that only those who need such data at work have access to it. They should maintain rules for data use and ways to track it. Information commonly used or known by some employees – customer contract information, e.g., or pricing structures – are best stored on computers or in files at company offices.

Employees who use or have access to important information should be asked to sign confidentiality agreements. They make clear party rights as to the ownership and use of private material. They also provide a ready tool for enforcing rights when necessary. Confidentiality agreements should therefore include provisions that allow a company to obtain injunctive relief, collect damages from improper use or disclosure of information, and allow for the recoupment of legal fees. When employees get new jobs within the company or leave the company for a different job, new signatures on confidentiality agreements may be required.

The same principles of law apply to noncompetition agreements, which provide another, closely related tool for protecting business information. While they are not easy to enforce in Massachusetts, at least when they are overly restrictive, non-competes serve an important purpose that transcends enforcement issues. Employees who sign them, after all, need to take care not to transgress them lest they face costly and potentially damaging legal action – regardless who wins and who loses. In most cases, this alone is enough to achieve a reasonable company’s objectives, since departing employees and their new employers will normally be happy to reach amicable agreements on post-employment conduct. The goal of a strong noncompetition agreement should not focus on keeping employees from working for a competitor. It should instead be to protect important company information such that employees do not use that data on behalf of a competitor.