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Employees Cannot Use Trade Secrets of Former Employer

On Behalf of | Jan 11, 2017 | Employment Law

New Hampshire courts narrowly construe employment non-competes to only protect the legitimate business interest of the employer.  For example a non-compete agreement that limits an accounts payable employee of a software company from working for a competitive software company may not be enforceable.  However, if that employee had used or threatened to use confidential financial information of the former employer for the competitor’s advantage such as to disclose pricing strategies, profit margins, or the overall financial health of his former employer, a judge may issue an order called an injunction prohibiting the misappropriation and use of that information as a trade secret, even without an agreement. The issuance of an injunction has long been considered an extraordinary remedy but judges do issue injunctions when a trade secret is stolen or is threatened to be stolen because once  trade secrets are lost, they cannot be recovered and monetary damages are often insufficient.

If the employer can show that it took reasonable measures to protect the confidential information, such as password protecting access to electronic confidential information given only to those with a need to know and keeping hard copies in locked rooms or file cabinets, that confidential information may be protected as a trade secret.  Changing locks and passwords when people leave would be prudent and confidentiality agreements that clarify the employee’s obligations, while not a requirement, are also very helpful to prevent misappropriation of trade secrets and to get favorable court orders when needed.

If, as the former employer, you are providing the information to the customer itself it may be difficult to then show that former employee in working now with that customer’s competitor cannot use that information that the customer received.  For example, if the former employee worked up a proposal for services his company would provide a customer and then the employee left to work for a competitor, it would be very difficult to convince a judge that the employee’s use for the competitor of the prior proposal that the customer already has received to solicit the same services is violating the trade secret laws.  To protect against such a scenario it would be most effective to have a non-solicitation agreement in place that would prohibit the former employee from working with the customers that he had previously been working with through the former employer for a set period of time, such as a year.  Courts narrowly construe employment non-competes against the employer yet are more receptive to non-solicitations agreement that state that for the customers that you serviced while at the former employer, you cannot for work with for a specified period of time to allow the former employer to get a new face in front of the customer.

A non-solicitation and confidentiality agreement along with a well implemented plan to keep your confidential information truly confidential is part of a good overall business strategy to protect your valuable competitive edge.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].