Thursday, October 30, 2014


Employees owe their employer a duty of loyalty while employed and, absent an enforceable non-competition agreement, the employee is free to go into competition with an employer and use his or her general knowledge, skills and experience.
It is not enough for a company to assert it has trade secrets and then assume the burden is on the employee to prove that a violation has not happened. A recent case in business court here in North Carolina in September 2014, Unimin Corp. v. Gallo, 2013 NCBC 43, illustrates clearly the burden of proof for violation of trade secrets is on the plaintiff—you, and not the former employee.
There are steps a company can take to help ensure their employees are aware of specific trade secrets. This is not an exhaustive list and, of course, you’ll want to have an first review your policies regarding trade secrets to make sure they’re legally tenable and without loopholes.
1. Identify what is a trade secret.
2. Keep that information secret. (For example, describing a trade secret in a patent application will destroy the trade secret when the application is published.)
Make sure that other papers such as your business plans, white papers and communications at trade shows do not expose trade secrets.
3. The company must make its employees conscious that certain information is confidential and not to be disclosed outside the company lawyer.
4. Conduct an exit interview to review existing agreements, status of projects and location of information and files before the employee leaves.
5. Tailor non-compete agreements that must be signed by applicants prior to commencement of employment.  Make it part of an employee handbook or the “big stack of HR paperwork” your employees sign when beginning their employment. A general confidentiality agreement is not sufficient to protect trade secrets without effort from company leadership to let employees know that information is secret.
These non-compete agreements should be approved by business legal counsel. In most states, reasonable non-compete agreements are enforceable. However some states such as California will not enforce non-compete agreements.

The nature of an employee’s responsibilities, the length of obligations and definition of competing business are all key terms to remember. If you’ve used a boilerplate non-compete agreement you may have a false sense of security. Go back and review it. Or, better yet, the experienced business lawyers at today.  Don’t sell your business short by trying to go it alone.

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