When laying off staff there are many legal ramifications you have to consider to protect yourself against lawsuits. But while laying off staff is never easy, you have to make sure you protect your interests as well, particularly in terms of your intellectual property (i.e. patents, customer lists and more).

Keep in mind that some departing employees may intentionally or accidentally misappropriate your company data, which in the end could be damaging to your operations.

Minimizing the risk of laid-off employees absconding with sensitive company data requires planning between management and your legal counsel. There are also a number of measures you can employ to preserve the value of your intellectual property.


  1. Have employees sign non-solicitation agreements. In many states non-solicitation agreements are enforceable, but they often are not in California.  Non-solicitation agreements often address the protection of proprietary, confidential information like a list of customers and suppliers. If a non-solicitation agreement is crafted properly it can serve as a strong measure preventing departing employees from soliciting a former employer’s customers and suppliers at their next place of employment.
  1. Non-disclosure agreements. If you have company data that competitors could use to the detriment of your company, it would be wise to require your staff to sign non-disclosure agreements, which use a contract to reinforce the employees’ fiduciary obligations.  A typical non-disclosure agreement identifies the employer’s proprietary and confidential information, and requires the employee to acknowledge the value of preserving the secrecy of such information. The agreement requires that the employee keep such information secret for a certain period of time.  Before writing up a non-disclosure agreement, company management and legal counsel need to take an inventory of all that the employer wants to protect. In order to be enforceable, a non-disclosure agreement must be supported by adequate consideration (which means evidence of employment such as the payment of a wage for the employee’s services).
  1. Return or destruction of property. Before employees leave your employ, make sure that they have returned all of the company’s property, particularly any items that contain confidential information. That may include laptops, originals and any copies of company documents that the employee has made. Also make sure that company information, electronic files or other information stored on the employee’s personal or home computer is deleted.
  2. Access codes, passwords and identification. To make sure that a former employee does not access sensitive company data, you should change or eliminate any access codes, passwords for company e-mail, voicemail, telephone conference lines and computer systems or access to the employer’s facilities via doors with coded locks. Also collect any company ID cards. If you have concerns you can also notify customers, suppliers and others that the employee no longer works for you.
  3. Exit record. Make sure you have a record (a checklist for example) of the measures required of departing employees. This checklist will confirm that each departing employee has complied with your measures. Also, have each departing employee sign an acknowledgment that all of the company’s property has been returned or destroyed, and that they have read, understood and agree to be bound by their ongoing obligations under their non-disclosure and non-solicitation agreements.
  4. Exit interviews. The last thing you should do is conduct a formal exit interview with each departing employee. During the interview, try to ascertain the confidential information known to the departing employee and ensure that all records of that information have been returned. This is the time to remind the employee about his obligations under the non-disclosure agreement and the ramifications of violating the agreement either directly by disclosure or indirectly by performing work for other employers or for himself that requires use of this confidential information.