Leaving for a competitor? Onboarding new employees? Avoid accusations of trade secret theft

When a company hires talent away from a competitor, onboarding the new employee can pose significant legal risks for both the company and the new employee. A fundamental aspect of Silicon Valley is that employees are generally free to move between competitors.

This unrestricted movement of talent facilitates the robust competition that helps drive the Silicon Valley economy. While this is no doubt positive, unfettered employment mobility also creates unique challenges when it comes to protecting a company’s trade secrets, which are the lifeblood of many Silicon Valley companies.

Because of California’s policies regarding free employment mobility, unlike in most other states, California companies cannot protect their trade secrets with non-compete contracts. So, they instead rely heavily on trade secret laws for protection.

And, of course, when trade secret theft occurs, it is often when an employee transitions from one company to another. Thus, when a key employee gives notice that he or she is leaving for a competitor, it sets off alarm bells for the soon-to-be former company.

Unfortunately, because of the hypersensitivity to protecting trade secrets, many departing employees who have no interest in actually taking their former company’s trade secrets get accused of theft. This allegation can trigger a long, stressful, expensive legal process for both the employee and the new company, and sometimes cost the employee his or her reputation and new job.

This article explains how this situation arises and provides some practical considerations for how the employee transitioning jobs, and the onboarding company, can avoid an unnecessary legal fight.

1. California companies’ aggressive protection of trade secrets.

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