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Two Things You Can Do To Reduce the Likelihood That Your Company Will Be Found Liable For Conspiring Or Aiding And Abetting In An Employee’s Breach of Duty To A Former Employer

Posted in Breach of Fiduciary Duty/Duty of Loyalty, Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Employee Raids, Hiring a Competitor’s Employees, Other Restrictive Covenants, Protecting Trade Secrets and Other Business Information, Unfair Competition

When companies sue their former employees for theft they often claim that the former employee’s new employer has conspired with the former employee to misappropriate trade secrets, or that that new employer has aided and abetted the former employee’s breach of duty he/she owed to his/her former employer.

Like Woodward and Bernstein, liability “follows the money.”  CurreChuck Post 07_finalnt employers are often added to trade secret and breach of duty lawsuits because they have deeper pockets than former employees.  Conspiracy and aiding and abetting claims are more vague and less precise than are other business claims.  Often plaintiffs need only allege that the new employer benefitted from wrongful acts.  Employers should not believe that there is nothing they can do to reduce the chances of a successful conspiracy or aiding and abetting claim against them.  By adopting best practice policies and procedures, an employer can do a lot to reduce the likelihood that it will be found liable on these theories.  These policies and practices should be adopted well in advance of the hiring of a competitor’s employees.  Although there are many policies and practices that an employer can adopt, two of the most common (and most powerful) are: (1) a policy in the employment handbook that prohibits the use or importation of third party or prior employer information.  Such policies often read:

As a condition of employment, employees of the company agree and represent that during the course of their employment with the company, they will not use or disclose any confidential or proprietary information of any third party, including any prior employer, unless such third party has consented to the use or disclosure of that information in writing.

Moreover, as a condition of employment, employees of the company are required to comply with the terms of any agreements where any prior employer pertaining to confidential information, non-solicitation or non-competition to the extent that such agreements are enforceable under applicable law.

Second, employers can, in their offer letters, expressly condition employment upon the non-importation or use of any information from the former employer.  Such language often provides that:

This offer of employment is conditioned upon your agreement that you will not bring any proprietary, confidential or any other business information from any place or former employment to the company.  The company will provide everything you need to perform your work.

While nothing can guarantee that your company will not be named as a conspirator of abettor in a trade secret or breach of duty case, adoption of policies like this will help.