Firm News – September 2014

The attorneys at Bailey Brauer obtained successful outcomes for several clients over the past quarter. Examples include:

– Defeating antitrust and deceptive trade practices claims of nearly 200 plaintiffs from Louisiana, Arkansas and Texas filed in one of the nation’s most challenging venues;

– Successfully resolving claims of an alleged fraudulent investment scheme during a federal jury trial; and

– Defeating fraud and contract claims alleged against a technology company officer in a complex multi-party dispute stemming from the issuance of preferred stock.

Attorney Clayton Bailey was a guest speaker and provided a “Legal Update” at the U.S. Poultry & Egg Association’s 2014 Live Production and Welfare Seminar held in Nashville, Tennessee.

As Hiring Improves, the Likelihood of Litigation Rises.

As the jobless rate decreases, there has been an avalanche of lawsuits filed by former employers relying on the vagaries of trade secret and unfair competition laws to prevent the hiring of employees by competitors. What can you do to minimize your exposure?

As the economy has improved over the last 18 months and individuals are joining new employers, we have noticed an uptick in lawsuits filed by employers accusing their former employees of stealing “trade secrets” or confidential and proprietary information. While many lawsuits may be necessary to shield against unlawful conduct, these lawsuits can unfortunately also be used by former employers as a sword to lash-out against the former employee that had the audacity to effectively “fire” his former employer. The lawsuits may also be used by companies to strike fear in competitors that might be contemplating issuing job offers to other current employees.

The basic rule of fair competition for a departing employee is easy to state: 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 the employer and use his or her general knowledge, skills and experience.

While this general rule is grounded in common sense, lawsuits involving departing employees joining competitors are extremely complicated. These lawsuits are typically put on a fast-track because the employer seeks to enjoin the former employee from working for the competitor and disclosing information that could be used to unfairly compete in the marketplace. What this means is that instead of a lawsuit taking twelve to eighteen months to litigate and try, these lawsuits result in discovery (depositions, written discovery and motion practice) and essentially a trial before a judge within a few weeks or a month after the lawsuit is filed.

In light of these legal realities in the current marketplace, there are various steps that can be taken to minimize the risk of such a lawsuit being filed. Besides paying attention to existing employment agreements and recognizing, if necessary, valid and enforceable obligations thereunder (e.g., non-compete, confidentiality, and invention assignments), one step that a company can take when hiring a competitor’s employee is to submit, along with the job offer, a form warning the candidate against copying, downloading and removing information owned by the former employer. Additionally, once the employee joins the company, the orientation process should include the new employee signing a form acknowledging that he has not taken any proprietary and confidential information or trade secrets from the former employer and will not use this information during employment in the new job.

Similarly, employees leaving an employer to join a competitor should first carefully assess any duties and obligations under agreements entered into with the former employer. The employee should obtain legal advice and follow it. Once the employee determines that he is not prevented from joining a competitor, the employee should avoid removing information from his former employer’s premises before and after giving notice of termination of employment. This includes refraining from forwarding information by email to the employee’s personal email address. Additionally, if personal information is stored on the former employer’s computer, the employee should request, in writing, that the former employer allow the employee to download and copy the information.