Category Archives: Misappropriation of Trade Secrets

Multistate Non-solicitation Agreements: Does One Size Fit All?

Many employers have offices in multiple states, but want to have one form of employee agreement prohibiting solicitation of employees and customers. Since some state laws, namely California, may be too different to reconcile with other states, what sort of non-solicitation agreements work in California?

In California, non-solicitation agreements are reviewed as contracts which prevent a person from engaging in a profession, trade or occupation which, with limited exceptions, are void under Business and Professions Code section 16600. Thus, recent cases have held that an agreement between an employer and employee prohibiting the solicitation of customers is not enforceable unless tied to the employee’s use of trade secrets or some other legal duty owed by the employee.

Employers have tried to draft enforceable non-solicitation clauses by characterizing customer and employee information as trade secrets. In late 2018, in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. the Court of Appeal upheld summary judgment in favor of the former employee defendants and their new employer. The former and new employer were competitors providing temporary travel nurses to medical facilities across the U.S.

The employee defendants were recruiters who signed agreements that “during employee’s employment with the Company and for a period of one year after the termination employee shall not directly or indirectly solicit or induce, or cause others to solicitor or induce, any employee of the Company . . . to leave the service of the Company.” AMN claimed that the travel nurses names and contact information were trade secrets. The court concluded that the nurses had applied to AMN years before and that the information was already in AMN’s possession or could have been obtained from other sources such as a public media group network, the Gypsy Nurse Group. For this reason, and because the employee’s profession was the recruitment of other employees, the Court found the non-solicitation agreement unenforceable.

Employers in California must therefore normally tailor any non-solicitation agreements and carefully consider if the employee truly possesses confidential/trade secret information that could be used to solicit customers. To the extent the information the employee would use to solicit is a trade secret, courts have considered the agreement to be valid. Other states may allow broader non-solicitation agreements, therefore you should use different forms to receive the maximum protection in those states.

Quirky Question #283: They Stole Our Stuff, Can We Sue?

Question: My company recently terminated an employee, and we are very worried she accessed her email inappropriately in the days before she was fired. The timing of it all is … well, quirky.

Here’s what happened: The employee’s manager met with her on a Friday and informed her that her performance was not acceptable, even after several earlier warnings to improve.  The manager told the employee to go home early and return to work first thing Monday to meet with the manager and the manager’s supervisor.  The supervisor, manager, and employee met as planned on Monday and the employee was terminated.  Later that day, however, our IT folks reviewed her account and determined she had accessed her email dozens of times on Saturday and Sunday – there are no “sent messages” in her account, so we figure that she was printing off e-mail and maybe contacts because she saw the writing on the wall about the Monday meeting.

Our policies allow employees to access email from home – but we can’t think of any reason why she would have done so over this weekend and IT said she hadn’t logged in from home for at least six months. Needless to say, the timing is very suspicious, and we’re thinking about suing to find out what she did when she logged in.  Can we?

Answer→

Quirky Question #281: Deploying the DTSA

Question: We believe our former employee recently stole some of our trade secrets and went to a competitor.  Can we rely on the Defend Trade Secrets Act to bring suit in federal court?

Answer→

Quirky Question # 276: Ex-Employees Gone Rogue

Question: Our company uses agreements to try to protect our confidential and proprietary information. One of our former sales employees recently left us to work for a competing company.  We have evidence he took with him our confidential information about our clients and is planning to use it to sell products to our clients for his new employer.  When we reminded him he could not use our confidential information, he said we couldn’t stop him because the information does not qualify as a “trade secret” under our state’s trade secrets laws.  We looked into the issue, and he’s probably right that this information is not necessarily a “trade secret”.  We’re worried there’s nothing we can do to stop him from using our information to steal our clients.  Help?

Answer→

Question #273: Crafting a Concrete Non-Compete

Question: Our company uses non-compete and non-solicit agreements that bar former employees from having contact with any client of our company after they leave. One former employee who recently left is now claiming the agreement is invalid because it is “overly broad” in that it bars him from soliciting not only those clients of ours he used to work with, but clients he never had any dealings with.  I can see his point, but at the same time, how are we supposed to know when he signs the agreement which of our clients he will end up working with?

Answer→

Question #272: Competing in California

Question: One of our company’s employees recently left to start a competing business. We think he started this process while he was still employed by us, and that he is probably using information he learned from us.  We’re in California, so I know we don’t have a non-compete agreement with him.  Do we have any other recourse?

Answer→

Quirky Question # 141, Customer Lists as Trade Secrets

Quirky Question # 141:

One of our sales employees recently left our company.  He now is starting to call on our customers.  It appears that he may have some of our customer lists in his possession.

We do not have any post-employment restrictive covenants, such as a non-compete or a non-solicitation agreement, that would govern his conduct.  But, aren’t customer lists trade secrets that he is precluded from using? Answer→

When Workers Steal Data to Use at New Jobs

When Workers Steal Data to Use at New Jobs
Despite some negative case law, the Computer Fraud and Abuse Act is an effective tool for employers.

In response to the economic crisis, companies have downsized, resulting in some terminated employees stealing vital data to improve their job opportunities with a new employer. In addition to traditional state remedies such as misappropriation of trade secrets, employers have been “increasingly taking advantage of…[the federal Computer Fraud and Abuse Act’s] civil remedies to sue former employees and their new companies who seek a competitive edge through wrongful use of information from the former employer’s computer system.” Pacific Aerospace & Electronics Inc. v. Taylor, 295 F. Supp. 2d 1188, 1196 (E.D. Wash. 2003). Answer→

Stealing Confidential Information, Quirky Question # 78

Quirky Question # 78:

I am the HR Director at our company.  I just learned that one of our most valuable employees has resigned and taken a position with a competitor.  I requested our IT Department to make an evaluation of his computer.  They reported to me that before he left, he emailed to himself and his new employer customer and rate information  We consider that information to be highly sensitive, potentially providing our ex-employee the chance to divert a significant portion of our business to his new employer.

Most of our employees have non-competition agreements but, as it turns out, the employee who just quit never signed one.  I also doubt that we could claim the data he took is trade secret.  Unfortunately, we have not taken reasonable steps to protect the confidentiality of this information.  Are we out of luck? Answer→