Amid the Great Resignation, do companies need to be worried about privileged and confidential information going out the door with former employees?
prA company must take steps to protect its privileged and confidential information from disclosure to third parties, of course; and the need to take steps to safeguard this information becomes even greater with former employees, who are no longer under a company’s direct control.
The Great Resignation has resulted in millions of individuals changing jobs since 2021, a mobility trend in the workforce with no apparent end in sight. This trend of workforce turnover has reinforced the need for companies to actively take steps to prevent the loss of any privileged and confidential information that may be in the hands of soon-to-be-former employees.
Here are some questions that employers should be asking:
How does the attorney-client privilege apply in the corporate setting?
The attorney-client privilege protects the confidentiality of communications between clients and their attorneys for the purpose of obtaining legal advice. The attorney-client privilege covers verbal and written communications, such as emails, letters, or memos, depending on the content of the communication.
The privilege can arise within the corporate setting when a company engages in-house or outside counsel to obtain legal advice. However, the privilege is not absolute and, depending on the circumstances, can be waived.
How does an employee’s resignation affect privileged information?
Depending on the nature of their job, an employee may have access to privileged information from their employment. This access may take different forms, such as hard copy documents or electronic access to files containing privileged information.
If an employee resigns, their personal and professional interests may no longer align with that of the company and can even run counter to it, particularly if the employee leaves to work for a competitor. At that point, a company’s ability to track and recover privileged information — once accessible to or held by a former employee — becomes more difficult, especially where the former employee no longer uses the company’s servers, networks, and equipment. As a result, the risks of misusing or improperly disclosed privileged information increases because of an employee’s resignation.
A company needs to be aware of the risk of waiving the privileged status of information that remains held by or accessible to a former employee. Otherwise, a company creates an unnecessary risk that a former employee’s access to, or possession of, privileged information creates a privilege waiver. For example, a company risks waiving the attorney-client privilege if it enables a former employee to keep privileged documents and neglects to undertake efforts to re-obtain the documents once it determines that the employee had maintained possession.
What precautions should a company take to avoid losing privilege protections?
Recent court decisions have required that employers take adequate and reasonable measures to preserve the privileged status of their documents. As a result, a company should proactively take and — where possible, document — its efforts to help prevent a waiver of the attorney-client privilege for information held by or accessible to a resigning employee.
To avoid this risk, a company should determine whether and to what extent a resigning employee has access to or holds privileged information. It also should also remind a resigning employee of any confidentiality policies or agreements, terminate the employee’s access following the employee’s resignation, and request that the employee return and verify in writing that the employee does not possess any privileged materials. The company should also be prepared to promptly enforce these policies or agreements, if necessary.
If the company later determines that an employee continues to hold privileged materials, it may need to consider sending a cease-and-desist letter or, worst-case, engaging in litigation.
Are there other legal protections to consider for confidential information?
A company should also review applicable federal and state laws and other existing protections to determine if the resigning employee possesses — or has access to — other confidential or proprietary information. The company should then review and undertake all efforts to preserve any confidentiality protections.
For instance, a company should consider whether any of the information accessible to or held by a resigning employee qualifies as a confidential trade secret under federal or state law. The Defend Trade Secrets Act of 2016 protects trade secrets that are used in or intended for use in interstate commerce. Most states have adopted the Uniform Trade Secrets Act, which also protects information qualifying as a trade secret. Other protections may also exist under federal or state law.
Under the trade secret statutes, however, the definition of a trade secret is broad. For example, the Massachusetts Uniform Trade Secrets Act includes information such as a company’s customer lists, business strategies, inventions, or techniques within the definition of a trade secret. However, as a federal appeals court recently recognized, determining whether and to what extent a company can rely on trade secret protections under federal or state law may depend on if the company has taken reasonable efforts or measures to protect its trade secrets.
As a result, the protection available to a company may depend on how it sought to protect its trade secrets after an employee submits their resignation and ultimately leaves from the company.
You can find out more information about protecting employers’ privileged communications, trade secrets, and other confidential information here.