Protecting Your Confidential and Proprietary
Information
Employee’s Duty of Loyalty, Trade Secrets,
Non-Compete Non-Solicit and Confidentiality Agreements
2013 PWSHRM and VFN
EMPLOYMENT LAW SUMMIT
October 4, 2013
Presented by:
Kristina Keech Spitler, Esq.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved
[email protected]
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This presentation and information is designed to provide general information, is not intended to constitute legal advice and should not
be utilized as a substitute for professional services in specific situations. If legal advice or other expert assistance is required, the
services of a professional should be sought.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved
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Kristina Keech Spitler, Esq. is a partner with the law firm, Vanderpool, Frostick &
Nishanian, P.C., where she represents and advises businesses on employment and business issues and
litigation including matters relating to hiring and firing, breach of agreements, non-competes and
restrictive covenant agreements, discrimination, disabilities and accommodations under the
Americans with Disabilities Act, Fair Labor Standards Act (wage and hour law), Family Medical
Leave Act, defamation, and other legal concerns for employers. In addition, her practice includes
drafting and updating handbooks and policy manuals, and drafting severance agreements. Ms.
Spitler is a highly rated speaker and trainer on employment law issues.
Ms. Spitler was recognized as one of Virginia’s “Legal Elite” in Labor/Employment Law by
Virginia Business Magazine in 2010 and 2012. In 2009, Ms. Spitler was named as one of Virginia’s
“Most Influential Women” by Virginia Lawyers Media. She received The Loy E. Harris Award from
the Mayor of the City of Manassas in 2008.
Ms. Spitler has been a featured speaker on employment law issues on WUSA Channel 9
News and has served as a resource and quoted in Workforce Management Magazine.
Contact at [email protected] or (703) 369-4738
Vanderpool,
Vanderpool, Frostick
Frostick &
& Nishanian
Nishanian PC
PC
Where Business
Business Goes
Goes SM
SM
Where
Copyright 2013 Kristina Keech Spitler All rights reserved
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“While no single conversation is guaranteed to change
the trajectory of a business, a career, a marriage, or a life,
any single conversation can.”
-- Susan Scott
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Protecting An Employer’s Business
Employee’s Duty of Loyalty to Employer
Uniform Trade Secrets Act
Non-Compete, Non-Solicit, and Confidentiality Agreements
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Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved
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Employee’s Duty of Loyalty to Employer
Generally, every employee owes a duty of loyalty to their
employer during employment.
This duty of loyalty includes a duty to not compete with
his/her employer while employed.
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Employee’s Duty of Loyalty to Employer
In Virginia, employees (even officers and directors) can
generally make plans to resign and subsequently compete
with their employer without breaching their duty of loyalty.
But how far can they go in “making plans”?
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Employee’s Duty of Loyalty to Employer
Employees cannot:
- Use employer’s trade secrets for own benefit
- Misuse employer’s confidential information
- Usurp corporate opportunity
- Tortiously interfere with a contract or business expectancy
- Engage in common law or statutory conspiracy to harm
another in his trade or business
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Employee’s Duty of Loyalty to Employer
Directors and Officers
Pursuant to Virginia law, directors and officers are suppose to
exercise good faith business judgment as to the best interest
of the corporation.
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Virginia Uniform Trade Secrets Act
Uniform Model Act - 1979
Virginia enacted its version of the Uniform Trade Secret Act
in 1986.
Maryland and DC have also enacted versions of UTSA.
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Virginia Uniform Trade Secrets Act
Misappropriation of Trade Secrets:
1. Information is a “trade secret”
2. That has been misappropriated
3. Which has independent economic value
4. Is not generally known
5. Is not readily ascertainable; and
6. Has been the subject of reasonable methods to maintain
secrecy
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Virginia Uniform Trade Secrets Act
Trade secret is defined as:
“information, including but not limited to, a formula, pattern,
compilation, program, device, method, technique or process,
….”
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Virginia Uniform Trade Secrets Act
Examples of protected trade secrets:
customer/client/patient lists
pricing information
business strategies
sales techniques
methods of doing business
computer software
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Virginia Uniform Trade Secrets Act
Misappropriation means:
1) Acquisition by a person who knows or has reason to know
that the trade secret was acquired by improper means; or
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Virginia Uniform Trade Secrets Act
2. Disclosure or use of a trade secret by a person who
a) Used improper means to acquire knowledge of TS; or
b) Knew or had reason to know that his knowledge of the TS was:
i) Obtained from a person who used improper means to acquire it;
ii) Acquired under circumstances that required a duty to maintain its
secrecy;
iii) Derived from a person who owed a duty to the person seeking to
maintain its secrecy; or
iv) Acquired by accident or mistake.
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Virginia Uniform Trade Secrets Act
Trade Secret must not be generally known to those in the
relevant industry or trade.
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Virginia Uniform Trade Secrets Act
Trade Secret is not readily ascertainable by proper means.
If obtain information by proper means, the information cannot
be a trade secret. For example, information obtained from
telephone book, industry or business sources, published
patent, reverse engineering, or observing the product or
service on public use or display is not obtained by improper
means.
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Virginia Uniform Trade Secrets Act
The trade secret has been subject to reasonable efforts to
protect its secrecy.
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Virginia Uniform Trade Secrets Act
Remedies for Misappropriation of Trade Secrets
- Injunctive relief
- Damages
- Actual loss caused by the misappropriation; and
- Unjust enrichment; or
- Reasonable royalties
- If willful and malicious
- Punitive damages (capped at $350,000)
- Recovery of attorneys’ fees
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Virginia Uniform Trade Secrets Act
VUTSA does not affect
- Contractual remedies agreed upon by the parties
- Other civil or criminal remedies not based upon misappropriation of
trade secrets
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Non-Compete, Non-Solicit and Confidentiality Agreements
Businesses use contracts between the business and its
employees to protect its confidential and proprietary
information.
It’s a contract – must meet minimum requirements for a
contract
Is continued employment sufficient consideration?
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Confidentiality agreements can be another tool for employers
to protect their information and data even if it does not meet
all requirements for a trade secret to be protected under
VUTSA.
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Non-Compete and Non-Solicit Agreements are special kinds
of contracts – they are considered restraints on trade (limit
freedom of employees to move to different jobs or start own
business which is generally favored in free market systems).
US courts do not favor them. Many foreign countries and
some states find them unenforceable all together. In US,
depends on law of each state.
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Covenant not to compete will only be enforced if:
1) The restraint is no greater than is necessary to protect the
employer in legitimate business interest;
2) The restraint is not unduly harsh and oppressive in
curtailing employee’s legitimate efforts to earn a living;
and
3) The restraint is reasonable from a public policy
standpoint.
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
A covenant not to compete must be reasonably limited as to:
1) length of time the employee cannot compete after end
of employment;
2) The geographical territory in which cannot compete;
3) Prohibit only activities which would compete with or
adversely affect the employer’s legitimate business
interests.
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Covenants to not solicit
customers/clients/patients; and/or
employees/vendors/consultants
are considered less restrictive than non-compete provisions.
Court may give non-solicit provisions slightly more leeway.
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Enforcement against senior executives v. lower level
employees
Enforcement when agreement entered into from the sale of a
business v. employer/employee situation
Enforcement when agreement entered into in
teaming/subcontractor relationship
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
Courts’ interpretation and enforcement of these agreements
over the last 20 years.
2012 Virginia Supreme Court decision in Preferred Systems
Solutions, Inc. v. GP Consulting, LLC– some good news for a
change
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Non-Compete, Non-Solicit and Confidentiality Agreements
“Blue-penciling” – depends on state
Forum selection clauses
Enforcement against new employer
- Former employer’s claim for tortious interference
with a contract or an alleged conspiracy to breach a contract
or harm a business
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Copyright 2013 Kristina Keech Spitler All rights reserved
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Let’s Play a Game to Practice What We Know
YOU BE THE JUDGE!
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Copyright 2013 Kristina Keech Spitler All rights reserved
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CONTACT INFORMATION
Kristina Keech Spitler, Esq.
Vanderpool, Frostick & Nishanian, PC.
[email protected]
9200 Church Street, Suite 400
Manassas, Virginia 20110
(703) 369-4738
700 Princess Anne Street
Fredericksburg, Virginia 22405
(540) 479-4275
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved
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