Protecting Your Trade Secrets Through Restrictive Covenants

How can I prevent employees from stealing my protected information?

Trade secrets are often a central component to your business’ success. Whether it be confidential customer lists, software programs, recipes, or any other protected information, the theft of trade secrets can be quite damaging to a business. Trade secret theft is most often committed by employees or former employees. Often, employees who are about to leave the company will take trade secrets with them. To protect your trade secrets, it is critical that you have some sort of employee restrictive covenant agreement so that you comply with state and federal statutes, while also securing contractual remedies in the event of theft.

Nondisclosure Agreements

Nondisclosure agreements or confidentiality clauses are intended to prevent employees from using confidential information during and after their employment with the company. Generally, confidential information will be considered any information concerning the business that is not readily available to the public. Employers should consider having employees sign a nondisclosure agreement so that they are put on alert that they must protect an employee’s confidential information. Further, the agreement meets the statutory requirement for employers to take steps protecting their confidential information.

Noncompete Agreements

Noncompete agreements are the strongest of restrictive covenants that protect trade secrets, but they have also fallen into disfavor in recent years. To be effective, you need to make sure your noncompete agreement is written so that it will be enforced. Noncompete agreements prevent former employees from competing within a specific geographic area for a defined period of time. In order to be enforced, the geographic and time period must be narrowly defined. For example, a restrictive covenant that prevents competition in your particular field in the same town for a period of two years could be enforced, whereas a noncompete agreement that attempts to prevent the former employee from working in any related fields in the entire state for three years may be struck down.

Employers in New York City will want to consult with an employment law attorney to determine which restrictive covenants they should use to protect their trade secrets. Nondisclosure and noncompete agreements are just two of many restrictive covenants that an employer may benefit from in order to keep their confidential information private.