Most businesses appreciated that they have to protect themselves from their current and potential competitors.  During good times, potential competitors may include your own employees.  When employees see a business making a lot of money, there is always a temptation to start a competing business.  Unfortunately many employees walk out the door with trade secrets such as proprietary processes, customer lists, and other confidential business information that gives them a competitive advantage.  Such misconduct can destroy  a business even in the best of times.  In down times, however, the threat may be even greater.

While few employees who have a job will want to leave a stable income and go into competition in a bad economy, employees who have been laid off or fired may believe that they have nothing to lose by using the confidential information to start a competing venture.  Moreover, if their situation is desperate, they may be willing to undercut their former employer’s prices more than normal to steal away customers.  The bad economy only adds to the problem as even loyal customers may consider switching if they are tight financially and are offered a substantial decrease in cost.

Now is also a good time to consider non-competition agreements and other employment agreements.  In good times some employees will not agree to non-competition agreements because they have other options.  In down times, a non-competition agreement in exchange for some consideration such as a guarantee of employment for some length of time, or an agreement to raise or not decrease salary may be welcomed.

 

Thus, it  is as important as ever to ensure that a company protects its confidential information.  Employees should understand  what information is protected and may not be used to compete with the company.  The company should also control access to confidential information such as customer lists, customer purchasing cycles, and anything else that would be beneficial to a potential competitor.   Avoiding a scenario where your own confidential information is used against you is a great way to avoid going out of business.

Finally,  it is wise to promptly investigate any activities which may involve this appropriation of trade secrets or other confidential information.  A company is in a much better position if it immediately takes action than if it waits until it has lost numerous customers to a former employee.  Once the former employee has taken a large number of customers it may be too late.