How Businesses Can Protect Their Data from Former Employees

It is not uncommon for employees to leave for other firms, taking client databases with them, according to RBC. Do companies have effective tools to protect their trade secrets, client lists, and in-house documents from individuals choosing to work for other employers?

Victoria Arutyunyan, Partner at FBK Legal, pointed out:

The departure of a valuable manager to a direct competitor or their decision to launch their own business in the same market gap and poach clients is a headache for many companies.

Firms often try to mitigate this risk by including specific provisions in the employment contracts, often referred to as the so-called ‘Chinese wall’. Typical prohibitions include: the employee cannot work for competitors for one or two years after termination, cannot engage with former clients, or conduct negotiations with key partners. Violations result in penalties, fines, and claims for damages. However, in court practice, such ‘golden handcuffs’ are unenforceable – little more than words on paper.

In the event of a former employee moving to a competitor or starting a rival business and poaching clients, if the matter goes to court, the former employer faces a watertight defence argument: ‘Clients did not leave because the ex-employee stole the database, but since they were dissatisfied with the terms of engagement’. Courts uphold the principle of freedom of contract and competition. In the current Russian legal landscape, businesses are left with one path: it lies in protecting data, rather than in prohibiting departure.