In a previous post, “Top 10 Business Law Mistakes (And How to Avoid Them), Part 2,” I pointed out how many businesses fail to protect key intellectual property and trade secrets. These are the things that give your company a competitive edge and help you stand out. In this article, I’d like to drill down a bit further and explore exactly which forms, non-disclosure agreements, etc., you should consider having all of your employees sign.
Some small business employers don’t use this option enough, especially for new employees joining the fold. We generally want to trust other people and feel good about the folks we bring into the mix. None of us want to wear a mantle of paranoia and treat everyone suspiciously. But being cautious makes good business sense and doing what you can to insure you won’t be robbed blind is all about “good business.”
The first step is deciding what in your business qualifies as a “trade secret” or intellectual property (IP). Do you have a specific recipe you use (this is your IP) in making those amazing dark-chocolate-and-caramel muffins? Are there specific parts you get from specific suppliers when building custom travel trailers? In addition to the behind-the-scenes information about your products and services, business owners should also consider access to customer data, access to computer servers, and physical access to company vehicles and property. Every employee has the potential to inflict major harm or embarrassment to your business and having the right mutually agreed documentation could minimize the potential for disaster.
While we don’t want just anyone blabbing to the world how we create the magic we do in our business, a blanket “don’t say anything to anyone, ever” form likely won’t work. There needs to be a documented company policy and protocol outlined as well as training. Sometimes, an employee needs to be shown specifically what’s a trade secret and what isn’t so they understand the factors that make your business unique. Non-disclosure agreements are fairly simple, but should be drafted by an attorney with a working knowledge of federal and state laws that cover this area.
NDAs – also called “confidentiality agreements,” “confidential disclosure agreements,” or “proprietary information agreements” – are legally binding documents that outline what information can be shared between two parties and what information should be limited to outside third parties. In this case, we’re talking about how much an employee can or can’t share with a customer, vendor, or member of the public. Your business needs will dictate how detailed employee NDAs should get.
There are strict laws governing confidentiality and non-compete clauses. Some things you would think make sense to protect a business aren’t enforceable by law and may violate an employee’s rights. A common fear I hear business owners express is what to do if an employee comes in, learns the business and its secrets, then jumps over to a competitor or starts their own company. Some may think there’s little you can do, but there are things like geography, use of proprietary information, or even time that can be regulated and spelled out in a new-hire contract. Again, it’s best to have a business attorney draft the appropriate forms so everyone is protected.
This fall, we saw an interesting debate on morals and personal conduct play out with the NFL and our national anthem. Personal politics aside, some of the arguments boiled down to how much say an employer may have over the actions of its employees. Certainly criminal activity, sexual harassment, and drug use can be grounds for termination, but how much can we as business owners regulate the personal lives of our employees? It depends, based on your business and the law.
The reality is federal and state regulations protect the rights of citizens as long as they aren’t breaking the law. But what happens if an employee’s personal life becomes public and reflects negatively on your business? If you’re in an employment-at-will state (and most of us are), you have the right as an employer to fire any employee for any reason. But be careful; the reason needs to be objectively clear and not based on personal preference. Consult with an attorney or human resource expert to identify how best to approach this topic with employees.
There are a dozen other items you should probably address in the hiring process, but the bottom line is this: To protect your business, you need to take an extra step to protect your trade secrets, your intellectual property, and your assets. (And your employees should be your most valuable assets.) Give me a call at 214-974-8940 and let’s talk about how I can apply my business law expertise to help you do what you do best.
ATTORNEY CHRIS PARVIN is Board Certified in Estate Planning & Probate Law by the Texas Board of Legal Specialization. Mr. Parvin is the Managing Partner of the Dallas, Texas law firm of Parvin Law Group, P.C. and serves as an Adjunct Professor of Law at Texas A&M University School of Law. Mr. Parvin can be reached by email at firstname.lastname@example.org.
Parvin Law Group, P.C. is a Concierge Law Firm in Dallas, Texas with attorneys practicing law in the fields of Estate Planning, Probate, Business Law and Family Law.