Why Protecting Confidentiality Is More Imperative Than Alarm Dealers Think

Learn tips on how alarm companies can protect their data and proprietary way of doing business.

Most alarm dealers hire and fire employees on a routine basis. Terminated employees leave their company with some knowledge of confidential data and business practices of their former employer. Some exit with highly confidential data that belongs to the company – customer lists are probably the best example. Some employees use company records and billing data for nefarious purposes.

Several alarm company owners that I have spoken to have expressed shock and dismay about a trusted employee who betrayed them. Some incidents I have witnessed have involved six-figure losses from embezzlement. Others involved substantial losses because a former employee left with a customer list and started an alarm company and usurped many of their previous employer’s monitored accounts.

The point I want to emphasize is that regardless of how much a company may trust its employees, all alarm companies should take proper steps to protect their data and their proprietary way of doing business. In too many cases, alarm companies make it far too easy for an employee to go out and carbon copy their operations and take their customers with no recourse to the employee.

Employee Agreements Offer Legal Cover

The first step that I would recommend to protect one’s company would be to have an “employment agreement” with every employee. The agreement should include confidentiality and nonsolicitation language. In general, nonsolicitation language is preferable to “noncompete” language, which is tougher to uphold in court. A good source for such an agreement is through widely renowned alarm industry attorney Ken Kirschenbaum, who offers these agreements to alarm dealers at alarmcontracts.com (and writes about legal topics for SSI).

I asked Ken about the trademarked Kirschenbaum contracts and he detailed, “The employment agreement is written in a general format so that terms of employment can be inserted but contains provisions dealing with confidentiality and restrictive covenants. While often overlooked until a problem arises, alarm company owners will find that the employment agreement is essential, clarifying terms of employment so that disputes can be avoided and creating value for the business. Alarm dealers should expect potential buyers to ask, ‘Have your employees signed employment agreements?’ Expect a lower multiple if your employees are free to compete against you. The employment agreement should be used together with an updated employee handbook.”

Clearly Define What Materials Are Sensitive

Another key element of protecting one’s business is clearly stating what is confidential within the agreement. If employees are to honor their part in keeping confidential information confidential, they need to know what information is considered as such. This should be outlined in their employment agreement. In addition, if a file is confidential (e.g. a customer file) whether it is a paper file or an electronic file, it should be marked “confidential.” It provides leverage on the part of the company to protect its interests. If sensitive information is transmitted within the office via E-mail, the subject line should always be marked “confidential.”

I have been amazed over the years at just how many bookkeepers have embezzled money from alarm dealers. I defer on this matter to former president Ronald Reagan, who once stated, “trust, but verify.” Where bookkeeping is involved, it’s imperative to institute a “separation of duties” plan so that no one person has complete control over all financial data and recording. A simple example would be that the bookkeeper generates the financial data for a deposit to the bank, but another employee actually makes the deposit. The next level is to have a financial auditor perform a review of the company’s financial information. They will look for any improprieties in the bookkeeping and make sure that everything is done to GAAP standards. Obviously, this will come at an expense to the company, but compared to the expense of embezzlement, or just poor bookkeeping, it is cheap. Even if a company trusts its internal bookkeeper, it never hurts to verify.

I have only scratched the surface of what is a very complex issue, but at the very least, I hope that maybe this article will prompt some alarm company owners to consider taking more in-depth measures to protect their businesses

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About the Author


Mark Matlock is Senior Vice President at United Central Control, a division of Lydia Security Monitoring Inc.

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