Remote work grew exponentially during the pandemic and seems to have become a permanent feature of working life in the U.S. According to a survey by Pew Research, 60% of employees whose jobs can be performed remotely are still working from home all or most of the time. Another 18% of such employees report working from home at least some of the time.
Along with the explosion of remote work came a massive increase in employees using their own computers, tablets and mobile phones for work. Allowing employees to use their own devices brings with it the risk that that company data will migrate to the devices.
It is thus more important than ever for employers to address this issue when a remote-work employee resigns to join the competition, including by demanding that the employee return and purge any company information. In addition to running the risk that its confidential data may be disclosed to a competitor, an employer that fails to do so may also find itself unable to enforce its non-compete agreements by injunction. That is, at least, what the U.S. Court of Appeals for the Seventh Circuit held in in a recent case brought by a logistics company seeking an injunction against six former employees.
Defendants Use Their Personal Devices to Work Remotely During the Pandemic
The defendant employees all joined the plaintiff company before the pandemic. Much of their work involved cold calling prospective customers. As they talked to prospects and customers, the employees entered information into a central database maintained by the company.
Like many workers, the employees were sent home to work remotely during the pandemic. While working from home, the employees used personal devices for work, including to access the company’s database.
In spring 2021, the employees quit their jobs to join a competitor firm. They did so notwithstanding the fact they each had signed a non-compete and non-solicit agreement that on its face prohibited them from joining the competitor.
In what later proved a significant misstep, the company did not request that the employees delete company data from their personal devices upon their resignations. An HR representative from the company held an exit interview with each of the employees, but did not use it as an opportunity to address this issue.
The Court Rejects The Company’s Request for an Injunction, in Part Because of Its Failure to Police Data Loss Issues
The company filed a lawsuit against the former employees seeking an injunction enforcing the non-compete and non-solicit agreement.
In support of its request for an injunction, the company argued that it would suffer “irreparable harm” if the employees were allowed to continue working for the competitor. One of the main irreparable harms the company cited was that the employees would continue to use the company’s confidential information unless enjoined.
The trial court denied the company’s request for a preliminary injunction and the Seventh Circuit affirmed. In rejecting the employer’s irreparable harm argument, the court criticized the company’s failure to take basic steps to ensure the employees – who had all been working from home – did not retain any of the allegedly highly confidential information on their personal devices.
The court noted that the company’s “human resources manager conducted exit interviews … without asking [the employees] to produce their personal devices for inspection, state whether they had company data on those devices, or remove company data.” The company’s failure to take “basic steps” to secure its data made its claim of irreparable harm “ring hollow.”
Takeaway: Demand Return & Purge, Especially Where the Employee was Working Remotely
The company made itself an easy target by filing suit claiming irreparable harm without first taking basic steps to secure the company’s data upon an employee’s exit.
Of course, the company’s failings may not have been as stark as the court portrays. The employees all had non-compete and non-solicitation agreements. Most such agreements also contain language requiring the employee to stop using and return the company’s confidential information upon the termination of their employment. The company may have felt such agreements were sufficient.
But even if it did have confidentiality language in its agreements, the employer committed an unforced error by failing to address this issue when the employees resigned. Whether in an exit interview or in a letter from HR or legal counsel, basic data security practices mandated that the employer take steps to confirm that the employees did not have the company’s confidential information. This was particularly so since the employees had been working from home during the pandemic and using their personal devices.
This case holds a lesson for employers. Some employees who started during the pandemic have worked remotely for their entire employment and may have never even been to the office. When the employee quits, it is almost as if she or he never worked for the company. Employers must resist the temptation to move on without taking steps to ensure that the employee does not have the company’s confidential information on his or her personal devices. An employer that fails to do basic follow-up with a departing employee may later find a court unsympathetic to its plight.
 DM Trans, LLC v. Scott, Case No. 21-3101 (7th Cir., June 28, 2022).
James L. Komie is an attorney with Howard & Howard in Chicago, IL. He regularly writes and speaks on new developments and trends in the law regarding non-competes and trade secrets, as well as issues relating to the financial services industry.