In an employee separation agreement, how do you protect company property?

When an employee departs on shaky terms, how can I safeguard my company's assets?

A separation agreement's fundamental concept is that the firm promises to offer something of value (consideration) to a departing employee—typically in the form of a separation payment—in return for the employee making specific obligations to the company. Protecting your company's assets should be one of the major goals of any separation agreement

It might be difficult to let go of any person you hire. Employees may leave because they are unhappy or believe they are being pushed out due to office politics. Some employees are asked to resign, while others are dismissed on the spot for a variety of reasons. Frequently, one party may attribute responsibility to the other, or there will simply be irreconcilable disagreements that make the working partnership difficult to continue. In any of these situations, where an employee's leaving may be less-than-pleasant, a separation agreement is a smart idea to minimize possible disputes and protect your company's interests

Protecting Confidential Information

The sensitive information of your organization is one of its most precious assets. It contains information on your customers and suppliers, financial data, strategies, business plans, papers, communications, work product, legal information, addresses, phone numbers, email addresses, and all other contact information for everyone who is important to your company. Even a smidgeon of this information shared with a rival may tilt the market balance considerably in their favor. The release of sensitive material might potentially result in a public relations nightmare or a legal setback for your firm. As a result, employees are frequently forced to sign a nondisclosure agreement (also known as a confidentiality agreement or NDA) when they begin working for a firm.

Employees frequently have access to or are exposed to a company's private information. A separation agreement, especially in cases when the employee is departing on poor terms, can assist ensure that any sensitive information is kept secret, regardless of the individual's personal emotions toward the firm.

In a separation agreement, the non-disclosure (confidentiality) clauses should be drafted as extensively as possible to include not just all confidential information in general, but also those specific things that are of particular importance and concern to the firm. A technological business, for example, could be particularly concerned with preserving its intellectual property rights. The maker of a food product may wish to keep the components of their secret sauce hidden. It's typically a good idea to specify what "secret information" entails and what it does not. Furthermore, the nondisclosure provision should be in place for the longest feasible period of time.

Proprietary Rights

Confidentiality clauses are frequently confused with proprietary rights protection. As a result, property rights provisions are frequently left out of separation agreements. However, the preservation of proprietary rights is a different, unique, and critical issue that should be addressed as well, particularly for businesses with a stake in safeguarding their trade secrets and intellectual property. The key distinction between a nondisclosure clause and a proprietary rights clause is that a proprietary rights clause stipulates that the firm immediately owns any innovations or intellectual property generated by the employee while on the job. On the other side, the nondisclosure clause prevents the departing employee from exposing the company's trade secrets or intellectual property.

Unlike the nondisclosure clauses, which only apply to the employee's future behavior, the proprietary rights clauses can be enforced right away. The firm might make signing and delivering all relevant paperwork to have all intellectual property rights handed to the company a condition of the employee receiving the separation compensation. This provides the firm with power to assure complete employee compliance. Furthermore, if the firm attempts to submit a copyright, patent, or trademark with respect to any such intellectual property in the future, the proprietary rights provision should oblige the employee to assist with the process.

Return of Company Property

When an employee was terminated in the past, it was possible that the person might flee with some random office things (highlighters, pens, paperclips, and the like). Employees may now carry gigabytes of corporate data on a portable hard drive, thanks to recent technical advancements. As a result, before any of the separation compensation is provided to the employee, the separation agreement should include a language requiring the employee to return all business property (including any equipment, papers, memoranda, keys, CDs, and so on).

The corporation has the same power as the proprietary rights clauses in that it can require the employee to return corporate property right away by delaying the distribution of any separation incentive until the employee has completely complied. If the employee has previously returned all of the company's property, this clause should include the employee's declaration that all goods have been returned and that no copies or duplicates have been kept. It's worth noting that this clause works in combination with the confidentiality provision, because sharing private information becomes much more difficult if the underlying data and documents are no longer in the employee's possession.

​​​Yoel Molina, Esq. (AKA “Mo”)

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