It's the nightmare scenario. Employees leave in droves to a competing company, and suddenly clients are disappearing and revenue is plummeting.

This very nightmare befell one Connecticut- based mortgage firm. After 10 successful years, Charter Oak Lending Group is now teetering on the brink of failure thanks to nearly a dozen employees defecting to a larger competitor - taking customer lists, confidential referral sources and nearly $1 million in pending business with them.

Charter Oak's story is a dramatic one, but it brings national attention to two critical business questions: How do companies protect themselves from being poached by competitors? And how do they prevent employees from walking away with vital client and business information?

These are questions that many businesses in Washington are familiar with. But in this state a trade secret is a trade secret, whether it is written down on paper, stored in a database or memorized in someone's head. Employers have the law firmly on their side if they take the proper precautions.

THE UNIFORM TRADE SECRET ACT

Under Washington's Uniform Trade Secret Act, a trade secret is defined as "information, including a formula, pattern, compilation, program, device, method, technique or process that: (a) Derives independent economic value, actual or potential, from being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

It's a lot of legalese that gives a broad definition of a trade secret that provides nearly blanket protection for an employer to protect the information and resources that are critical to its business. Even information about a company that is in the employee's head can be considered a trade secret.

But while an employer can enforce this act even without a specific trade secret or noncompete agreement in place, establishing a clear agreement defining trade secrets and noncompetition boundaries is advisable for a number of reasons:

- An agreement can provide proof that the employee was notified of his or her obligation of confidentiality.

- A written agreement can clearly define what the employer considers trade secrets.

- The agreement can be used in potential litigation as evidence of the employer's efforts to protect its trade secrets.

DRAFTING WITH CARE

The key, of course, is a well-crafted employment agreement. At a bare minimum, an employment agreement should include:

- Clear identification and definition of specific trade secrets.

- A definition of noncompetition, outlining geographic, time-related and even competitor employment restrictions.

- A specific promise by the employee not to take information or items identified as trade secrets upon employment termination.

- A statement that the employee's obligation survives after employment ends.

- A provision for injunctive and economic relief for the employer in the courts if the employee violates the agreement.

- A clause that provides for attorneys' fees and costs.

- A provision for choice of law and forum location to resolve disputes.

- A signature block for the employee to acknowledge having read, understood and agreed with the contract.

Also consider adding a liquidated damages clause, which is a reasonable estimation of the economic damages that the employer would suffer if the employee violated the agreement.

DON'T GET CARRIED AWAY

Noncompete agreements are pretty standard for most businesses working in a competitve environment. But noncompetition restrictions are only enforceable if they are considered reasonable. A clause stating that employees who leave may never work in that industry again would not be upheld. Nor would one prohibiting someone from working at a certain company.