Provided by: Jennifer Kirschenbaum, Esq.
May 18, 2021
HELP! I have been notified that a former employee stole private information from my practice. What should I do? How can I prevent this from happening again?
Dr. S I'm sorry to hear that! I've asked Scott Dillon, Esq. of our litigation department to address.
Written by Scott Dillon, Esq., Sdillon@kirschenbaumesq.com
The most important lesson to be learned from this article is that it is strategically important that employers enter into employment contracts with their employees. Those contracts must expressly set forth what information is proprietary and/or trade secrets to the organization. The contracts should further put employees on actual notice that proprietary information may not be taken upon the termination of the employment relationship and should that occur, former employees will be subject to harsh monetary damages (including legal fees and costs) and similar restrictive treatment authorized by Courts.
As we all are well aware, employees choose to move on to new organizations. The question is though, what protections do employers have against employees who take (steal) proprietary information and/or documents when they leave? Fortunately, the answer is the employers have many tools in their arsenal to protect their assets.
Upon discovery that a former employee has taken information from the company, the employer may immediately bring a law suit in either a Federal Court or state trial Court, seeking various remedies to protect its interests and recoup any money damages it has suffered. Significantly, the employer may seek the immediate entry of a preliminary injunction. A preliminary injunction is a temporary order, which will prohibit the former employee (defendant) and/or the new employer, from using any and all proprietary information that the employee took. The preliminary injunction will be effective immediately upon entry by the Court, and will subject the former employee and the new company to significant monetary damages if they violate the terms of the injunction.
Preliminary injunctions also require defendants to: i) immediately disclose the identity of all individuals whom are in possession of the stolen information and the exact location of same; ii) directing any individual to return the information and permanently delete and/or destroy the information in their possession; and iii) direct and authorization a forensic examination of any and all electronic devices (phone, computer, cloud storage, zip drives) of any individual or organization in possession of the protected information. As the action proceeds the employer should seek to convert the preliminary injunction into a permanent injunction, forever barring the employee from using the proprietary information. The employer may seek fees and costs related to the need to seek the injunction.
In the complaint against the former employee, an employer has myriad causes of action it may bring related to the monetary damages it has suffered by the theft. Specifically, in Federal Court, employees may bring claims under the Defend Trade Secrets Act, which imposes very harsh monetary damages against former employees, as well as their new employer, for their possession and use of proprietary information. Furthermore, common law claims for breaches of the duty of loyalty/faithless servant and breach of contract (the employment contract) may also be brought. Employers may seek the return of all salary paid to the former employee from the time commencing when it can be proved that the employee was actively taking information in anticipation of leaving the company.
The entire litigation process briefly described above goes so much more smoothly and rapidly (cheaper) if employers simply set forth in an employment contract exactly what information is proprietary and/or trade secret to the organization and then goes on to prohibit the taking of that information and giving notice that a breach will be met swiftly and aggressively. Even without the employment contract, employers still possess the ability to bring litigation, but the burdens of proof will be much higher and thus take longer to achieve the desired results.
Of course, there is no requirement you file a lawsuit. Most employers will start with a letter demanding the employee return any information taken, or make reasonable assurances the information has not been shared and/or destroyed. If the letter has the desired effect, great. If not, you can seek redress through the courts, or if the employment agreement calls for arbitration, you can seek redress through arbitration.
On a going forward basis, if you are not sure your employment agreements provide adequate protection from theft, or defining what is company property, now is the time to review, not later. In many instances, the employment agreement is what gives us leverage over the employee for redress - by creating what is confidential and creating the obligation for protection by the former employee. If you want a quick eye ball on your form agreement, email to Taryn for an assessment at Tcrimi@kirschenbaumesq.com.