CONFIDENTIALITY AND NON- COMPETE IN THE WORKPLACE Connie Dai, Attorney CUTLER & WILENSKY, LLP February 21,

CONNIE C. DAI, ESQ. Practice business, employment and business litigation Business - transaction, incorporate, draft and review contracts, general corporate matters Employment – wage & hour, wrongful termination, retaliation, misclassification employee and independent contractor, severance, non-compete, non-solicitation, confidentiality Business and financial consulting in Canada and U.S. M.B.A. from University of Calgary, Canada J.D from Suffolk University Licensed in Massachusetts and New York State Rated a Super Lawyer in business/corporate practice by Super Lawyers Magazine in

CONFIDENTIAL INFORMATION v. TRADE SECRETS Definition  Is secret  Used in one’s business  Give business competitive advantage used over competitors and not known to them Trade secrets sometime is a subset of confidential information Legal bases for misappropriate trade secrets - Breach of contract (if agreement exists) - Common law employee/officer’s breach of duty - Statutory violation (Federal and/or State) - Breach principal of good faith and fair dealing 3

EXAMPLES Examples of trade secrets  Customer names, contacts, prices, ordered products/services  Financial information  Manufacturing process/R&D/testing method/design/formula Examples of non-trade secrets  Public information, routine business data, promotion/marketing material easily accessible by competitors  Patent  Information business fails to take reasonable steps to protect 4

CASE STUDIES Customer information is not confidential information  No mechanism exists to separate confidential and routine  Employer never notified employee of confidentiality  Employee memorialize the list and takes nothing away * Customer information is confidential information  Employer informed employee of its confidentiality  Information collected over many years  Business is family controlled for almost 50 years Middle ground case  Employee is allowed to contact clients of former employer because he knew them personally and brought them in.  However, he is ordered return client list to employer. 5

MISAPPROPRIATE TRADE SECRETS Plaintiff must establish  Existence of trade secrets.  Plaintiff has taken reasonable steps to protect it.  Defendant used improper means to acquire and use it. Defenses  The information is not trade secrets.  Plaintiff took no steps to protect the secrecy.  Defendant did not use improper means to acquire it.  Defendant did not use it.  Statute of limitation is passed. 6

EMPLOYER’S DUTY Clearly define the trade secrets Document what employee brings in Limit access on need-to-know basis Document corporate policies/employee handbook Meet, explain, inform in writing, have employee’s written acknowledgement Sign NDA or insert a provision in other agreements Reaffirm duty not to disclose at exit interview Old employer - write to employee’s new employers New employer – confirm with employee if he is under any contract or have him make representation Employer and its officers/directors may be liable for taking confidential information 7

EMPLOYEE’S DUTY Know of such duty Know clearly what is the trade secrets If asked to sign agreement read and understand contract Cautious about what to post in social networking Do not disclose or abuse 8

NON-COMPETE IN MASSACHUSETTS Only contractually protected - no contract no protection Balance legitimate business interest v. employee’s right to make a living Valid for only protecting legitimate business interest  Goodwill  Protect trade secrets  Protect confidential information Prevent employee from working for competitors is not legitimate business interest Reasonable in time and space Employee may use general skill and knowledge 9

EMPLOYER’S TO DO LIST Enter into a non-compete with employee at start of employ If substantial change to employee duty, enter new non- compete Time is usually during employment plus 6 month to 12 months after Space depends on the nature of business Combine trade secrets/non-compete/non-solicitation in one contract Explain to employee in person Reaffirm during exist interview 10

EMPLOYEE’S TO DO LIST Read and understand non-compete and ask questions Do not automatically assume non-compete is valid just because you signed it Challenge the validity of non-compete on one or more base If court decides non-compete cannot be enforced you are not bound 11

DAMAGES TO PLAINTIFF Plaintiff is employer  Injunctive relief – order employee return and/or destroy trade secrets, not to work for a particular employer  Monetary damage – money plaintiff could have made if it were not for defendant’s misappropriate trade secrets or breach of non-compete, may be doubled or tripled  May also sue new employer for intentional interference with contractual relationship Plaintiff is employee  Ask court not to enforce NDA or non-compete  Monetary damage 12

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