Three things HR should do when an employee is suspected of sharing company secrets

HR Director Alan Price from employer advice service Peninsula discusses how HR can manage an employee they suspect is sharing private or confidential company information

A company’s information is one of its most important assets and ‘data leaks’ can be expensive – providing valuable data for competitors.

The word ‘industrial espionage’ conjures up images of James Bond, with secret envelopes and switching of briefcases at exotic locations.  Whilst we’ve all seen hi-tech espionage in movies, with heroes risking life and limb to protect a CD or chip, stealing corporate information is often far more low tech.  Hacking is a recent concern – but if the right policies, contracts and restrictive covenants are not in place, stealing company secrets can be as simple as poaching your staff.


Poaching staff to poach secrets

Ex-employees who leave with a grudge are often only too happy to share secrets, and can be a major headache if the company don’t have the right contracts and restrictive covenants in place.

Car manufacturer Opel, the German division of General Motors, accused Volkswagen of industrial espionage in 1993 after Opel’s chief of production, Jose Ignacio Lopez, and seven other executives moved to Volkswagen. After initially claiming defamation, and a four-year legal battle, the case resulted in one of the largest settlements in the history of industrial espionage, with Volkswagen agreeing to pay General Motors $100 million and to buy at least $1 billion of car parts from the company over 7 years, although it did not explicitly apologize for Lopez’s behavior.  (source: Wikipedia)



Tapping existing staff for information

Unfortunately,  “Moles“, or trusted insiders, are generally considered the best sources for economic or industrial espionage, whether intentional, or simply those who are unaware they are divulging vital information.

We spoke to HR Director Alan Price from employer advice service Peninsula to ask how HR should respond when suspicions that a current employee is divulging confidential information are reported.  He says that HR need to respond to these allegations promptly in order to protect further information being lost to competitors.   Here are the three steps he advises them to take:


Step 1 – Carry out an investigation

The first step employers need to take is to carry out a full and thorough investigation in to the matter. The easiest way to resolve any suspicions is to monitor and review the employee’s company emails or computer use. Any right to monitoring is usually set out in the company’s internet, email or technology policy and may also be outlined in any confidentiality policy. Monitoring should not be excessive and the employee must know what will and won’t be caught, for example, whether personal emails will be read.


Step 2 – Take formal action

Where the investigation uncovers evidence of divulging confidential information, then the employer should take formal action.

This is essential to sanction the employee and also send out a clear deterrent to others. The appropriate sanction will depend on matters such as the information divulged, the seniority of the person, whether this was intentional, the employee’s length of service and their previous disciplinary record.

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Any disciplinary sanction needs to be reasonable in all the circumstances. In some cases, it will be reasonable for an employer to treat this as gross misconduct which summarily ends the contract of employment however, this will not always be the case.


Step 3 – Confidentiality Policy & Restrictive Covenants

Employers who have these suspicions, whether proven or not, may wish to introduce a confidentiality policy to ensure their business is protected in the future. A policy should set out the company’s rules on confidentiality, what can and can’t be done with company information, whether monitoring will be carried out including how and when, and any action that will be taken if the policy is breached.

Protecting the business becomes even more essential when an employee leaves. Ex-employees can take confidential information to competitors or use this information to set up in competition themselves. To avoid ex-employees divulging confidential information even after they have left employment, employers should put restrictive covenants in place. These restrict the employee’s actions and can cover confidentiality and disclosure.


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