6 steps to stop a bad-apple employee from stealing your trade secrets

It's a tale as old as time. Manager prepares to leave company to work for a competitor. Manager connects an external USB Device to his work computer and copies confidential files. Manager gives confidential data to his new employer.

That's precisely what Boston Beer Corporation (which owns Angry Orchard Cider) accuses Brian Soudant, a former strategic planning, business analysis, and brand analysis manager of doing on his way out the door to accept a position with Downeast Cider House, a competitor.

Boston Beer's lawsuit accuses Soudant of "maliciously and willfully misappropriat[ing] Boston Beer's trade secret information by disclosure for a direct competitor."

If an employee is going to steal, an employee is going to steal. You can't prevent a bad apple from doing bad things. But you can take a few steps to best position yourself to protect your assets in the event you have a bad apple in your midst.

If you can’t beat ’em, sue ’em.

“Competition is fine, cheating is not.” That’s what Elon Musk tweeted after Twitter’s lawyer’s cease and desist letter to Mark Zuckerberg went public.

Twitter accuses Meta of engaging “in systematic, willful, and unlawful misappropriation of Twitter’s trade secrets and other intellectual property.”

The problem, however, is that according to Meta, “No one on the Threads engineering team is a former Twitter employee — that’s just not a thing.” 

NLRB General Counsel Jennifer Abruzzo just obliterated non-compete agreements (maybe)

In my view, the proffer, maintenance, and enforcement of a non-compete provision that reasonably tends to chill employees from engaging in Section 7 activity … violate Section 8(a)(1) unless the provision is narrowly tailored to special circumstances justifying the infringement on employee rights.

With that sentence from NLRB General Counsel Jennifer Abruzzo's just-published memo — entitled, Non-Compete Agreements that Violate the National Labor Relations Act — Ms. Abruzzo sent employment lawyers (including this employment lawyer) scrambling to understand exactly what she said and what she means.

Federal agencies need to stay in their lanes

• National Labor Relations Board and Consumer Financial Protection Bureau announce new partnership to address employer surveillance, monitoring, and data collection in the workplace


• Worker advocates call on OSHA to set standard on employee surveillance


• NLRB General Counsel may seek to invalidate non-compete clauses in employee severance agreements

These are just a few of headlines I've recently read in which one federal agency or another is signaling an intent to regulate outside of its core mission. Federal agencies should stay in their lanes, period. OSHA regulates workplace safety. The NLRB regulates the relationship between unions and management, and in non-union settings the rights of employees to engage in protected concerted activity.

Spotting the employment law issues in “She-Hulk"

Donny Blaze was a former student of Kamar-Taj, having dropped out after failing to adhere to their strict teachings. He left, however, with a souvenir, a sling ring, which sorcerers use to open mystic portals. Blaze then uses the sling ring, along with what he learned during his time at Kamar-Taj, to spice up his otherwise very pedestrian cabaret magic act.

Wong, the Sorcerer Supreme, seeks your legal counsel to file suit against Blaze to enjoin his use of Kamar-Taj's mystic arts. 

What are the potential claims? Let's explore.

The time has come to limit the overuse and overbreadth of noncompetition agreements

It's been nearly five years since I asked this question: "Is your non-compete agreement killing a fly with a sledgehammer?" Now it seems that the federal government is asking the same question.

Yesterday, the Treasury Department published its report, "The State of Labor Market Competition" (as reported by The New York Times). The report sought to answer to investigate the effects of a lack of labor market competition on our country's labor market and answer whether that lack of competition hurts labor markets.

One of the key issues the report addresses is the impact of the overuse of noncompetitive agreements and other post-employment restrictive covenants. The report calls for laws or regulations to limit the use and impact of these agreements.

Whistleblowing and self-help discovery: lessons from Frances Haugen, the Facebook whistleblower

"Can she do that?" That was the question my wife asked me as we watched last night's interview of Frances Haugen, the Facebook whistleblower, on 60 Minutes.

The "that" was the revelation that Haugen stole a trove of confidential documents just prior to quitting her job to support her allegations against her employer.

"It depends," I told my wife, offering the stock lawyer answer to most questions.

You don’t need to wait for President Biden to fix what’s wrong with non-compete agreements

On Friday, President Biden signed an Executive Order on Promoting Competition in the American Economy. According to the Order, its goal is to promote a "fair, open, and competitive marketplace" and "the welfare of workers, farmers, small businesses, startups, and consumers" through the elimination or limitation of "excessive market concentration," which "threatens basic economic liberties, democratic accountability." One of the President's targets is "companies [that] require workers to sign non-compete agreements that restrict their ability to change jobs." Indeed, according to the President, half of private-sector businesses require at least some employees to enter non-compete agreements, affecting some 36 to 60 million workers.

Thus, President Biden ordered "the Chair of the FTC … to consider working with the rest of the Commission to exercise the FTC's statutory rulemaking authority … to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility."

Who owns intellectual property created for a company?

Growing up in Philadelphia, there are few things more beloved than the Phillie Phanatic. Which is why I’m so intrigued by the lawsuit the Phillies recently filed against the people who claim to own the rights to the mascot the team contracted them to create in 1978.

Which got me thinking … what rights does a company have to intellectual property created by an employee or an independent contractor?

No, the feds should not ban noncompetes because of #MeToo

A recent op-ed in the USAToday argues that the federal government should outlaw noncompete agreements because they trap workers in abusive workplaces.

Since women who complain about harassment face retaliation and even termination, often the only way to escape it is to find a new job. Yet for many women, continuing their careers with a new employer turns out to be impossible. 

That is because of noncomplete clauses. After they have resigned or even been fired, workers bound by noncompetes cannot accept employment in the same line of work or industry as their former employer for a specified period in a certain city, state or even the entire country. Nearly 30 million working people, including more than 12 million women, are locked into their jobs because of noncompete clauses.…

By depriving them of outside employment opportunities, noncompetes lock victims of harassment into abusive environments. 

I could not disagree more. Noncompete clauses are not responsible for trapping sexual harassment victims in abusive workplaces.

Lessons from Game of Thrones on an employee’s duty of loyalty #spoileralert

If you haven’t yet watched this week’s episode of Game of Thrones, consider yourself warned. There are spoilers below. Turn back now if you don’t want to be spoiled.

How to recover a stolen computer from an ex-employee in seven easy steps

As many as 60% of employees who are laid-off, fired, or quit admit to stealing company data. Sometimes, they download information on their way out the door. Sometimes they email information to a personal email account. And sometimes they simply fail to return a company laptop or other device that contains the data. In the latter case, it costs an average of $50,000 for an employer to replace a stolen computer, with 80% of that cost coming from the recovery of sensitive, confidential, and proprietary information.

When you put this data together, it becomes increasingly apparent that businesses must take proactive steps to protect their technology and data.

Bad employment policies lead to new legislation

All the way back in October 2014, I wrote about an Illinois Jimmy John's franchisee that had required all of its employees to sign a Non-Compete Agreement as a condition of employment. 

I was not kind to this employer:

It's one thing to bind your managers and other high-level employees to a noncompetition agreement. It's another to require the same of your low-level sandwich makers and cash-register operators. The lower down the food chain you move, the harder it becomes to enforce these agreements.… [W]e're talking about sandwiches. What's the legitimate business interest this employer is trying to protect?

Yet, in the nearly half-decade since, employers have not heeded my advice. And, when employers fail, legislatures sometimes step in to fix.

Non-solicitation agreements are not a license to steal an employee's already existing customers

Hall v. Edgewood Partners Ins. Center (6th Cir. 12/14/18) [pdf] asks a question that we see arise often in litigation with former employees over restrictive covenants—can an employer limit an employee's access to customers, clients, or other contacts that the employee had prior to the employment.

Or, to put it another way, who owns an employee's pre-existing book of business, the employee or the employer?

What’s the worst employee exit you’ve ever seen?

There is a right way to quit a job, and a wrong way to quit a job.

Last week, a Twitter employee demonstrated the worst of the latter.

Apple employee gaffe illustrates risk posed by YouTube videos in protection of trade secrets

An Apple employee lost his job this week after his daughter, Brooke Amelia Peterson, posted a YouTube video of her dad’s brand new, unreleased iPhone X.

ReCode has the details:

Peterson posted a five-minute video of a September day in Silicon Valley, which mostly included shopping for makeup and clothing. Harmless, and not unlike other YouTube videos posted by teenagers. 

But then, in the video, she visits her father on Apple’s campus in Cupertino for what seems like dinner. As they munch on pizzas in the company’s cafeteria, Peterson’s dad hands her his iPhone X to test. That’s when YouTube viewers got about 45 seconds of footage of Peterson scrolling through various screens on the new design and showing off its camera.

Does a LinkedIn request violate a non-solicitation agreement?

In Bankers Life and Casualty Company v. American Senior Benefits (Ill. Ct. App. 8/7/17), Bankers Life sued a former sales manager, Gregory Gelineau, for violating the following non-solicitation agreement after he jumped ship to American Senior Benefits, a competitor:

During the term of this Contract and for 24 months thereafter, within the territory regularly serviced by the Manager’s branch sales office, the Manager shall not, personally or through the efforts of others, induce or attempt to induce: 

(a) any agent, branch sales manager, field vice president, employee, consultant, or other similar representative of the Company to curtail, resign, or sever a relationship with the company; [or]

(b) any agent, branch sales manager, field vice president or employee of the Company to contract with or sell insurance business with any company not affiliated with the company. 

Is your non-compete agreement killing a fly with a sledgehammer?

At least half of my legal practice is serving as outside labor-and-employment counsel for small to midsize businesses. And, increasingly, much of that practice is consumed with drafting post-employment covenants, sending cease-and-desist letters to employees who are in violation of said covenants, or filing lawsuits to enforce said covenants; or, conversely, advising a business whether it can hire an employee with a non-compete agreement, responding to cease-and-desist letters, or defending a lawsuit seeking to enforce said covenants.

The White House challenges states to reform non-compete agreements

This week, the White House announced a call to action to reform non-compete agreements [pdf]. Instead of proposing sweeping federal legislation, it is asking each state to pass non-compete reforms. This call to action comes on the heels of a joint White House/Treasury Department report [pdf] issued this past spring addressing the use, issues, and state responses to non-competition agreements.

President signs the Defend Trade Secrets Act of 2016—what employers need to know

Yesterday, President Obama signed into law the Defend Trade Secrets Act of 2016. It creates a uniform, federal standard for the protection of corporate trade secrets.

What do employers need to know about this new law?