In the immediate aſtermath of this proposed rule, employers are asking, “what now?” In recent years, some forewarned of the impending threat to the use of noncompete covenants and emphasized the need for employers to protect their confidential information through other means. Regardless of the outcome of the proposed rule, the FTC’s action is a reminder that noncompete covenants are under ever increasing scrutiny and criticism, and employers must consider alternative ways to protect their confidential and trade secret information.
Over a year and a half ago, it was encouraged that employers “revisit the protections they have in place to protect trade secret and confidential information and their investments in employee training.” Especially in light of the FTC’s announcement, employers would be wise to revisit those protections and engage in a thorough three-step process to evaluate, identify and protect their confidential and competitive information.
1. Conduct a comprehensive review and identification of the company’s competitive, confidential and trade secret information.
2. Identify who has access to that information.
3. Evaluate how to best protect that information (potentially without the use of noncompetes).
Although this auditing process takes time and energy and is not a one-size-fits-all solution, it is an investment in the protection of competitive information that will pay dividends if the need to protect that information through litigation ever arises.
Generally, some of the safeguards the employer can use to protect this information include the following.
• Ensure access to shared files is on a need-to-access basis only.
• Limit access to client information to only those clients whom a particular employee services.
• Limit access to research and development information to only those individuals in research and development who are working on the particular project.
• Republish policies forbidding the use of personal email accounts for business purposes.
• Implement safeguards for the electronic mailing and sharing of confidential documents.
• Have employees acknowledge/reaffirm their understanding that company competitive information is owned by the company and only certain people are allowed access.
• Use nonsolicitation covenants in appropriate circumstances.
Identifying and ensuring adequate protection for competitive information is paramount, given the ongoing threats to the viability of noncompete agreements, both at the state and federal levels.
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