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Employee Contracts Hacked

Risk & Compliance

It is rare that a week goes by without the news broadcasting that yet another large corporation, or national government (including our own sadly), has been the victim of a data breach. In far too many instances, these savvy but devious hackers manage to obtain the personal data of thousands of employees and clients. In this current information age – where data is greatly demanded, routinely shared, and in many cases, highly valued – companies (and governments) must take a careful approach to the management and safekeeping of its employee's contracts.


Obviously, employee contracts contain substantial amounts of private information, the value of which tends to be easily monetized. This helps to shed light on the increasing prevalence of breaches, but some people may not realize the vast scope of damage that the theft of employee data may inflict. Here are the issues companies are most likely to encounter if they fail to protect their employees’ contracts: 

Identity Theft

This is probably the most obvious result of data theft. Hackers that access employee contracts can easily obtain an employee’s name, date of birth, social security number, and address. That short yet valuable list of personal information is usually all that is needed to open a credit card or take out a loan. Any other details needed for a fraudulent transaction can be forged with ease.

But, tracking down the culprits, contending with credit bureaus to repair errors, and cleaning up pretty much any aspect of the financial mess that identity theft creates can be exceedingly costly. The average cost of a data breach is $5.5 million dollars and the average cost per record compromised is $194. Setting up a highly secure employee contract database, on the other hand, can be done for around $5,000.

Embarassing Personal Information Leaked

Employee contracts may be simple one-pagers or voluminous sheets of detailed text. Some industries and certain positions necessitate a comprehensive description of the employee’s job duties and responsibilities. In some scenarios, there may even be certain physical or mental health requirements. And, the results of tests or procedures may be appended to the employee’s contract as part of his/her employment file.

For example, in the life sciences arena, individuals that handle important specimens may need to be pre-screened for certain viruses or medical conditions. There may be employment contract clauses requiring periodic testing, and even though the results may or may not make it into the actual contract, the information gleaned from the contract and any documents saved along with it may be sufficient to embarrass the company or employee.

Now, that is just one example of potentially embarrassing information contained, however subtly, within or in proximity to a contract, but there are surely other potential sensitive situations as well. Ultimately, companies must take serious measures to safeguard employee data to avoid any embarrassing disclosures.

Company Secrets Exposed

In addition to private information about employees, there is often telling information about a company contained within its personnel contracts. For example, there may be language about how an employee is expected to treat valuable intellectual property, which could signal to a potential thief that there is additional information they may want to seek via the company network.

Or, there may be special provisions that the company utilizes as incentives that other companies may try to replicate or improve upon to gain a competitive edge. The reality is that all company contracts are valuable, but employment contracts, in particular, demonstrate a great deal about how a company conducts its affairs, and that is worth protecting.

Talented Employees Enticed Elsewhere

Employee contracts usually contain information regarding annual wages, bonus structures, and vacation time. Obviously, companies sometimes put together extremely generous compensation packages to attract the best and brightest. If thieves and subsequently competitors, get their hands on this information, they can easily use it to undercut their competition by enticing talented employees to join them by offering an even more generous agreement. 

Clearly, losing talented employees, invaluable company assets, can cause tremendous losses in more ways than one. And, there is no excuse for it to happen due to company carelessness.

Incessant Litigation

All of the above issues along with any additional losses associated with them may very well result in litigation of some sort. There is simply no denying that we live in a litigious society, so the lawsuit possibilities stemming from a massive data breach seem virtually endless. Companies may be hit with legal expenses, attorneys’ fees, arbitration awards, court costs, and the list goes on and on.

With so much money on the line, it is far easier and cheaper to proactively and diligently safeguard data.

Perpetual Financial Consequences

Litigation expenses, the payment of damages, and restitution aren’t the only possible financial consequences. The financial fallout from stolen data may also include loss of revenue and profits, increased insurance premiums, the need for higher salaries to maintain quality, specialized consulting fees, and so many other additional expenditures, many of which may have been avoided with a simple investment in security.

This non-exhaustive list of unfortunate occurrences likely to result from the theft of employee data can be avoided by keeping employee contracts in a highly secure contract management system.

The Buyer's Guide to Contract Management Software

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