Five Tips for Protecting Your Company’s Trade Secrets

Protecting your trade secrets and proprietary information is a vital part of your business. Every company needs to have policies and agreements in place to prevent employees from stealing property, and wrongfully soliciting your employees and customers when they leave to work for a competitor. Equally important, you must ensure that newly hired employees understand their own obligations to past employers and do not take actions that may unwittingly expose your company to liability.

  1. When hiring a new employee (especially in management or sales), consider including language in the offer letter affirming that the employee has disclosed any restrictive covenants in effect from prior employers, and acknowledging that he/she will not bring any confidential documents, data, or information from previous employers to the company. Such language may protect the company from being sued if a new employee fails to disclose a restrictive covenant, or otherwise engages in a breach of duties owed to a prior employer.
  2. If you are considering hiring a group of employees from a competitor, negotiate with each one separately wherever possible. In many states, employees (especially managers) owe a duty of loyalty to their employer. Acting as a go between or actively soliciting for a competitor while still employed with the prior company could raise legal issues. If you are looking to hire a team or group, it is best to hire the point person first, then once aboard that person can set out to recruit the remaining employees to come to your company (assuming that employee has no contractual restrictions on solicitation).
  3. Develop a protocol for ensuring that high level departing employees do not download or otherwise misappropriate proprietary information. When notified of a resignation: (1) Conduct a review of work email for transmittal of information to personal email accounts; (2) Identify any suspicious use of removable USB devices; and (3) Conduct an exit interview that consists of asking the employee to affirm that all property has been returned, including all electronic devices and passwords.
  4. Handbook policies on confidentiality and the return of company property are appropriate, but a breach of a policy is not actionable, and does not entitle the company to injunctive relief (i.e. an order requiring compliance). Consider requiring a confidentiality agreement for any employees who have access to important company data or property that could be harmful if disclosed to a competitor, and you may want back if not returned.
  5. For key personnel, you may need more than a confidentiality agreement to protect the company’s interests. In those cases, consider the use of a non-compete and/or non-solicitation agreement (which can be coupled with the confidentiality portion into one document). A non-compete provision restricts the employee from working for a competitor for a certain period of time in a defined geographic area. Such covenants must be reasonable, and narrowly tailored to protect the client’s interests. A non-solicitation provision does not restrict the employee from working for a competitor, but restricts certain activities for that competitor, usually soliciting company customers or employees for a period of time. Like a non-compete provision, a non-solicitation covenant must be reasonable. For example, the restriction should only apply to customers with whom the employee actually had contact or access to confidential information, as opposed to a restriction from contacting all of the company’s customers.

Non-compete litigation is state specific and the laws can vary widely from state to state. For example, Texas allows reasonable restraints on competition, while California (and recently Massachusetts) outlaw such agreements. It is advisable to have any agreements reviewed for enforceability in the states where such agreements are likely to be enforced.

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New Bill is Preview of What Might Happen if Congress Flips in November

Many pollsters are predicting Congress could switch from Republican to Democratic control in November. It has been quite some time since we have seen any significant employment legislation from the Congress, but a newly invigorated Democrat Congress might get busy and start passing laws. A recent bill introduced by Senator Elizabeth Warren (D-MA) is a preview of what that legislation might look like next year.

Warren and fellow Democrat Senators Chris Murphy (CT) and Ron Wyden (OR) have introduced the “Workplace Mobility Act,” which would outlaw non-compete agreements. Specifically, the bill would require a posting advising employees that such agreements are unlawful, and provide for a private cause of action and fines against employers who enforce or threaten to enforce a restriction on competition. The law would allow agreements to protect trade secrets as defined under the U.S. Code, but is silent as to whether restrictions on soliciting customers or employees would be prohibited. The bill narrowly defines a non-compete agreement as one which limits an employee from performing similar work within a specific geographic area or for a specified period of time. The full text of the bill can be found here.

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Should Companies Change Harassment Training in the Wake of #Metoo?

One of the benefits of the recent #Metoo movement is that companies in every industry are rethinking not only employment policies, but their approach to training and organizational culture. I was recently interviewed for an article on how companies should adapt their training to address the cultural impact of the #Metoo movement. That article can be found here.

The dramatic return of sexual harassment cases to the forefront of pop culture and employment litigation should be a wake-up call to employers who rely on outdated and clunky harassment training videos or other boilerplate programs. Ask yourself, are you really having a dialogue with your employees about company expectations, how those expectations are applied in your particular workplace culture, and how to address concerns if they should arise? Admittedly, it gets hard to have effective and engaging training with thousands of employees in large organizations. Quality trainers are not cheap, and many companies don’t have this expertise in house. But, the expense of a few lawsuits will quickly tip the scales in favor of training over litigation.

Here are five tips to shift your company’s anti-harassment training into top gear and effectively address these challenging times:

  1. Unless you have employees in isolated, far flung locations, ditch the impersonal videos and computer-based training or at least alternate between live training and a boilerplate refresher. People need to see and hear someone talk about these issues to know the company takes it seriously, and so employees have the confidence to make a complaint. Create a training team made up of both internal and external participants to create an engaging, practical training program, keeping in mind that longer is not better. Aim for one hour or less.
  2. Bringing in an outside speaker is a good idea, especially if you don’t have a dynamic expert in your organization. That said, someone from HR needs to be a part of every training session to put a name with a face for employees to know and trust to handle these issues. It is also helpful for HR to listen to questions and get a sense of what issues may be present in the organization or might require follow up.
  3. Conduct separate training for managers and rank-and-file employees. Part of the message is the same, but part of it should be different. Employees will not be comfortable asking questions or talking about problems in front of their supervisor. Similarly, managers won’t be comfortable asking questions about handling an issue if the employee with the issue is in the room.
  4. Upper management must demonstrate commitment to the training program, and that starts with executives committing their own time to attend the same training as all other members of management.
  5. Update training every two to three years. Even the best programs and speakers can get stale. Having different speakers explain things differently can be helpful to avoid the boredom effect for long-term employees who have been through training multiple times.
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How Should Employers Respond to #MeToo?

The #MeToo movement started as a wave of press coverage exposing long-suppressed stories of sexual harassment and exploitation in Hollywood. That movement, however, has now gone far beyond Harvey Weinstein. High-profile cases involving judges, news anchors, politicians, and CEOs have become commonplace in recent months. Many companies are now receiving complaints of misconduct from years in the past, which are a challenge to investigate.  Unlike a court of law, which typically does not hear cases beyond the statute of limitations (which can be as short as 300 days in Texas), the negative press associated with these cases has no end date. Moreover, ignoring allegations of serious misconduct has consequences, both in the press and in the eyes of stakeholders, customers, and employees. The concern is that if an employee did this once, he or she has probably done it to someone else, and is maybe doing it currently to others who are not brave enough to face the backlash of making a complaint.

So, what is an employer supposed to do when it receives a sexual harassment complaint from years ago involving an executive or high-performing employee? Legally, the employee’s claims may be time-barred; the employee may not even work for the company any longer. Should you terminate an executive based on an uncorroborated allegation that is stale and will never even rise to the level of litigation? The answer, like in most legal questions, is “it depends.”

First, any allegation of sexual harassment (or any unlawful conduct for that matter) should result in an investigation, even if the conduct is old. If the accused is a serial offender, there could be other victims working for the company who have ripe claims sitting out there waiting to sue. Moreover, barring intervention, the accused may not realize there is or has ever been a problem, and may continue to do the same things that gave rise to the first complaint. Simply, the company should investigate to discover whether the old complaint is an isolated problem that is unlikely to reoccur, or involves something inherent in the employee’s behavior that poses a risk of recurrence.

Once the investigation is done, the company has to decide upon an appropriate response. Although the media would have you believe that every offender must be terminated, no matter how small or old the offense, those risks are largely overblown. I am a believer that employers should distinguish between honest mistakes and intentional misconduct. The Harvey Weinsteins of the world cannot be tolerated, and if that type of behavior is discovered, no matter how old, termination is appropriate. That said, employers should not panic nor overreact in responding to claims of harassment. Not every complaint over an inappropriate joke or consensual relationship gone bad requires termination. The following tips are helpful in deciding upon an appropriate response.

  1. How old is the complaint? What is the employee’s explanation for waiting so long to bring the complaint?
  2. Can the company corroborate any of the allegations? Have there been any similar complaints from anyone else?
  3. What was the accused’s response to the allegation? Is he or she believable?
  4. Is the allegation consistent with the accused’s reputation or character?
  5. Is the accused in a position where there is a high risk of future claims of misconduct?

As a legal matter, the most simplistic and conservative approach to a harassment complaint is to minimize risk. Continuing to employ someone accused of harassment is almost always going to be more risky than terminating the employee. But, legal risk is not the only deciding factor in the real world. Perhaps the accused is a key employee or a good person whom you simply believe was wrongfully accused. The best decision may not be the path of least risk. Obviously, every employer has to make that judgment call on a case by case basis, but there is no question that this decision-making process is now much more complicated in the era of social media and the #MeToo movement.

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Sexual Harassment Lawsuits Just Got Tougher to Settle

Just like the infamous line that Congress had to pass the Affordable Care Act to know what was in it, it seems we had to pass the new tax law to find out all of the hidden surprises. One item that received little publicity was an addition to the Internal Revenue Code that now prohibits a business from taking a deduction of a settlement for a sexual harassment suit if the settlement contains a confidentiality provision: “No deduction shall be allowed … for (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorneys’ fees related to such a settlement or payment.”

This provision had little discussion in the legislative process and appears to be a knee-jerk response to the “#Metoo” movement and recent publicity involving high profile sexual harassment cases. Unanswered questions include how attorneys’ fees related to the defense of a sexual harassment case will be treated for tax purposes, and whether a company can structure a settlement to separate out the sexual harassment claims if a plaintiff sues under multiple theories. For example, if a plaintiff sues for sexual harassment and wrongful discharge, could the company settle the sexual harassment claim for one dollar without confidentiality, then execute a separate agreement on the remaining claim with a full confidentiality clause protecting the bulk of the settlement amount?

No doubt, plaintiffs’ lawyers are already jumping on the bandwagon and pushing sexual harassment cases in the wake of the recent publicity. This law will provide even more leverage because the company will now have to decide whether it wants to risk losing the deduction as a business expense for the litigation fees and settlement of a claim, versus allowing a plaintiff to publicize a settlement (which could encourage more litigation). Neither of those options are good choices for employers.

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Performance Evaluations Can Pose Trouble for Employers

It’s that time of year again. You know the one. Supervisors hurriedly completing performance evaluations at the last minute to avoid nasty emails from the HR Department about missed deadlines. Sound familiar? If so, your company may be doing more harm than good. Evaluations are not a time for hurried compliance. These documents are important feedback tools and could be critical pieces of evidence in employment litigation. It is better to do nothing than to create an evaluation that paints a false picture of an employee’s performance.

So, what are some best practices?

  1. Quality over quantity. Evaluations don’t need to be 10 pages long. Short and to the point is better, especially if that format allows the author to provide some specific examples to support the assessment.
  2. Avoid evaluation inflation. What does “exceeds expectations” mean if it is third from the top and right above “average?” To a jury it means the employee is doing a good job, but in your organization it might mean that the employee is one step from being fired.
  3. Be specific. Multiple choice rankings work well in large organizations because managers do not like to write narratives, and the rankings allow the accumulation of data that can be useful in establishing trends and metrics. That said, every evaluation should have some narrative! Give examples of what the employee did well, or not so well, and some feedback on how to improve.
  4. Evaluate the Evaluator. HR has an important role in ensuring that evaluations are done correctly. That means more than just the mere fact they are completed on time. If a supervisor is giving everyone in his or her department high or low marks, that should raise questions. Similarly, if there is an employee whom everyone knows is having trouble, the evaluation should reflect those problems.
  5. Delivery is Key. Lastly, the paper evaluation is only half of the process. Delivering the message is equally important and should not be overlooked. Make time to have a meaningful meeting and not just a five-minute conversation. Reviews should include both praise and constructive feedback on areas for improvement. Ask the employee to provide his or her views on strengths and weaknesses. Many times they will identify the same weaknesses, which softens the blow.

The holidays are a busy and stressful time for everyone. Many companies have moved away from evaluations at the end of the year for this reason, but if not, it is important for this consequential process not to get lost in the shuffle. Supervisors must understand the significance of the process, and the need for both consistency and fairness. Sugarcoating helps no one, and giving everyone high marks diminishes the performance of the organization’s super stars. Balancing all of these interests is critical to creating a successful process that measures and rewards performance, and also protects the integrity of the process in case the company is forced to justify its decisions in litigation.

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Harvey Weinstein Case Brings Sexual Harassment Back to the Spotlight

The Harvey Weinstein case has brought a spotlight to a problem that has plagued not only Hollywood but other professions as well. While Corporate America has largely cleaned up its act and instituted robust anti-harassment policies and procedures, the rise of social media and the lax workplace culture inspired by tech giants have left many wondering if the workplace has taken a step back in recent years. Recent examples of large companies hit by sexual harassment scandals include:

  • UBER CEO and founder Travis Kalanack was removed after a checkered history which included, among other things, advising employees on drug use and proper etiquette for sex among employees at a company event.
  • Roy Price, head of Amazon Studios, resigned after a female producer on the highly successful Man in the High Castle show leveled serious allegations of sexual harassment.
  • Fox News Chairman Roger Ailes and host Bill O’Reilly were forced out of high profile positions over sexual harassment allegations

These cases have emboldened persons affected by sexual harassment to bring these cases to the attention of management and the press. Keep in mind that even old cases barred by statutes of limitation may still be eligible for criminal prosecution for assault, and lawyers for victims may still seek compensation in exchange for a confidential settlement that would avoid embarrassment to the company. Put simply, these recent high profile examples of skeletons in company closets rising up years after the fact are not unique, and can happen to any company, regardless of its size.

Now is a great time for companies to review their policies and procedures to make sure there are not festering problems that have been left unaddressed. Some takeaway suggestions include:

  1. Ensure that anti-harassment training and policies are being supported by every level of the organization, especially the C-Suite level. Executives and valuable employees should not be exempt.
  2. Is there a legacy of harassment that has been left unaddressed in the organization? Are there skeletons in the closet ready to jump out? If so, develop a game plan for that contingency.
  3. Revisit your organization’s policies with a fresh eye and perspective. Is there an effective complaint mechanism? Are employees using it? Just because you have no complaints, doesn’t mean you have no problems. Maybe the system is broken.
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Dept. of Labor Revisits Changes to Overtime Regulations

On July 26, the Dept. of Labor (DOL) published a Request for Information (RFI)(which can be found here), looking for input from the public on next steps after the Obama Administration’s effort to increase the minimum salary threshold for exempt employees was struck down in the courts. Although that case is still on appeal, the Trump Administration has not backed the Obama regulations and has only asked the courts to affirm that the DOL has the authority to increase the minimum salary threshold.

This new RFI opens up a number of new possible approaches to the appropriate salary level for an exempt employee, and signals that DOL is still committed to making changes. The current amount of $455 per week has not been updated since 2004. The Obama administration sought to increase this minimum amount to $913 per week, but the new Secretary of Labor, Alex Acosta, has said publicly that he thinks that amount was too high. This new RFI offers some insight into how DOL is now looking at this issue by asking for comments on the following approaches:

1. Different minimum salary thresholds depending on the size of the employer or the region of the country.

2. Different minimum salary thresholds based on the type of exemption – i.e. executive v. administrative.

3. Different thresholds for highly compensated employee exemption, based on geography, company size, etc.

4. Different methods for updating the above numbers based on either inflation or some other measure, and the appropriate time period to make these adjustments.

Responses to this RFI are due on September 25, 2017. It is widely expected that the agency will take some action to update the minimum salary threshold in late 2017 or early 2018.

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Is Your Company’s Hurricane Plan ready?

With the first tropical storm of the season bearing down on the Gulf Coast, it is a good time to dust off your HR Department’s Hurricane Plan and make sure it is up to date. If you don’t have one, it is an even better time to put one together. Attached is Cozen O’Connor’s HR Guide for Hurricane and Disaster Preparation. This is a handy checklist for the most common Human Resources issues that should be addressed in such a plan. These issues include:

1. Compliance with Chapter 22 of the Texas Labor Code: This law protects from discrimination employees who are absent because if an evacuation order. This law has certain exceptions, including emergency services personnel or those required to provide services for the general public during emergency situations. That said, companies who require such employees to work during a storm must provide emergency shelter.

2. Payment for Employees Who Are Absent Due to Weather: The FLSA treats exempt employees differently from non-exempt. Non-exempt employees must only be paid for actual hours worked. Exempt employees, however, must be paid if the work site is closed or unable to open because of weather for less than a full workweek.

3. On-Call/Waiting Time: Weather events often create unique circumstances that don’t fall neatly into existing policies. Employees may be stuck at work waiting for the weather to clear before they go home – is this compensable time? What if employees are on-call to return to the office after the storm has passed. Is this compensable “on-call time?”

4. Protected Leave Under FMLA: Disasters often create family issues, especially where there are elderly or sick family members who must be moved or cared for during such an event. These situations could trigger protection for absences under the FMLA.

5. Payday: No one wants to miss a paycheck. Make sure your company has a contingency plan in place to communicate with employees and maintain personnel functions like payroll and benefits processing even during a disaster.

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Is Comp Time Finally Coming to Private Employers?

Comp time has long been available to public sector employees, but never for private companies. That might be changing soon.

On May 2, the House passed the Working Families Flexibility Act. This bill would amend the Fair Labor Standards Act to allow comp time as an option in lieu of overtime. The full text can be found here. Some key points of the bill include:

– Comp time could only be used if the employee agrees, in writing, before the hours worked.
– Employees could not accrue more than 160 hours of compensatory time.
– Companies would be required to pay out unused comp time at the end of the year (i.e. no carrying over), and upon separation.
– Employees would be able to use comp time unless it would “unduly disrupt” the employer’s operations.
– Employees could ask for payment of all accrued comp time and would be able to opt out of comp time if requested in writing.

Democrats in the Senate have said they would filibuster the bill, so the fate of this bill is uncertain. Obviously, there are a number of important legislative measures right now, including tax and health care reform, so this bill will not be at the top of the list. Stay tuned.

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About HR Headaches
HR Headaches is a blog for Human Resources professionals, business owners, and in-house counsel to get the latest news, analysis and tips in the area of labor and employment law. Every day there are new court decisions, agency interpretations, and regulations which affect the workplace, making it difficult, if not impossible, for many employers to keep current. HR Headaches is dedicated to providing information in a practical, no-nonsense manner to help employers avoid legal disputes and keep policies up to date.
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