In the olden days, before everybody carried their contacts around in a giant database on a tiny phone, there were Rolodexes; Big, circular carousels of sheets to which you glued or stapled collected business cards. They weighed 37 pounds, took up half the desk and, as a result, they never left the office. Contacts were thus cataloged and maintained at work using work resources. A rule developed around them – the Rolodex Rule – which said that when you left a job, you had to leave your Rolodex on the desk. If you kept contact information for everyone you knew in your Rolodex and you left your job, you were out of luck.

The Rolodex Rule still rules. To this day, an employee cannot grab company records – including customers lists – on his way out the door.  But, when the customer lists were maintained on company owned property, it was easy to draw a boundary around them. Today, those lists live on microchips. They live on cloud servers. Some of those customer contact files are even maintained on social media accounts like LinkedIn.

Employers and their departing employees often fight about what the employee can do post-employment.    Many of those fights surround an employer attempting to get the employee to stay away from its customers.   Now, fights are starting to emerge in which an employer is claiming sole ownership over the employee’s LinkedIn or Twitter account.  Trouble is, the employer doesn’t actually have a right to keep an employee from competing or even talking to customers after he leaves the job, unless the employee signed a non-compete or non-solicitation agreement.  Not only does there have to be a non-compete or non-solicitation in place, but the text actually has to cover the exact thing the employer wants to prohibit the ex-employee from doing.

So, who owns an employee’s contacts? Sadly, like everything in the law, the answer is: that depends. If the contacts are actual digital files maintained on the employer’s computers and rented cloud servers, or in old-timey file cabinets, they are owned by the employer.  If an employee makes a copy of that list in any way, the employee has committed a bunch of violations.  The results can be severe. The employee’s departure could convert to a termination  for cause, denying him severance, a bonus or future rehiring.

And, if the records are TRADE SECRETS, the lists definitely belong to the employer.  Trade secrets are becoming the weapon of choice for employers.  Everything a boss calls a trade secret is not actually a trade secret.  A trade secret is information that gives someone a competitive advantage and is actually kept secret. Most pieces of information don’t qualify.  For instance, all customer lists are not that valuable by themselves.  But, more often, companies get denied trade secret protection for information because the company failed to do anything to keep the information secret. The boss has to take some steps to shield the information from public view.

So,  information is only a trade secret when: the owner actually tries to keep it secret and it can’t be reassembled from publicly available data. Customer information does get a little extra trade-secret-oomph if the customer lists were expensive to create and took years to put together.

But, there’s a problem. Something unique about customer lists – one of the most valuable assets of any business – eludes trade secret protection: customers are often public knowledge. And, something that is public knowledge is not also secret. So, for instance, if customers can be compiled from professional directories, trade publications or association membership lists, they aren’t secret. Or, if there is a page on a website that lists customers; or, if the customers can only come from a particular industry, then it is easy to figure out who the customers are or could be.  Ironically, less specialized businesses, with a wider variety of customers, have an easier time protecting their customer lists as trade secrets.

Employers have an interest in protecting the assets of their business. Employees have an interest in freely building on the cumulative experiences and relationships of their lives and careers. Who gets to use, or keep the other from using, contacts after the relationship ends remains murky.  Below are some tips for both sides.

 

For Employers

If you want to protect your customer lists from your departing employees, here are some tips:

  1. Put in place a proprietary rights agreement that defines confidential information, work product, and trade secrets – and assigns it all to you.
  2. Adopt a trade secret policy to identify trade secrets and establish processes for marking and protecting trade secrets to keep them secret.
  3. Develop a set of customs and company taxonomy for marking trade secret information.
  4. Put in place security procedures.
  5. Adopt clear and fair computer and mobile device policies to protect your information
  6. Have periodic training on trade secrets and confidentiality policies
  7. Create a process for employee exits to get back your stuff and send your employee off on a positive note (as much as possible)
  8. Get a computer forensics firm to monitor and search electronic devices for mayhem.
  9. But also…
    • Compensate your employees fairly. Invest in decent equipment. Treat your employees with dignity, holding them accountable, but rewarding them for their work. Make your shop a place where people want to work.
    • Take care of your customers. Charge fair prices. Deliver excellent customer service and quality products and services. Make your shop a place where your customers want to stay.
    • Don’t try to take everything from your employees to punish them when they leave.

 

For Employees

If you want to keep your contacts available to you, here are some tips:

  1. Start with the understanding that all business records belong to your employer.
  2. Maintain a separate set of contacts at home that only you create and control. Do not copy onto that database any valuable or proprietary information from your employer, like purchase history.
  3. When you meet a new person, do the work yourself to enter the information in to your separate, at-home personal database.
  4. Have a separate email for personal emails and contacts. Every once in awhile, email your business contacts nonbusiness messages from your personal email account. It builds a personal relationship that you can defend if necessary.
  5. Keep your own social media accounts in your name and under your credit card. If you don’t, your employer could one day claim the account.
  6. Whatever you do – don’t start madly copying files of any kind as prelude to the end of employment. It will get you in trouble plus it makes you look sort of skanky.
  7. Remember: you and your employer have a business relationship. A business relationship. Not a marriage or a forever family. Keep your shit separate.
  8. Negotiate with your employer – when things are good – about ownership of your contacts and social media accounts.

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