Safeguarding Trade Secrets Before, During and After a Reduction in Force


In these difficult financial times, reductions in force are increasingly common.If an employee must be ushered out the door, take care not to usher out the company’s trade secrets at the same time.

Trade secrets, especially those stored electronically, are typically portable. For this reason, terminated employees can easily walk away with trade secrets whether intentionally or inadvertently.

To safeguard trade secrets, employers should keep the following tips in mind before, during and after reductions in force. Even if the company is not contemplating a reduction in force, these tips are useful any time an employee departs.

First, what exactly is a trade secret?

Trade secrets, which are protected by state law, include information such as a company’s financial and pricing data, or customer lists. Most states, though not all, follow the Uniform Trade Secrets Act, which defines a trade secret as information that “(a) derives independent economic value (actual or potential) from not being generally known to, and not being readily ascertainable by proper means by, other persons … and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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