Many businesses across the country rely on certain trade secrets to ensure that they remain profitable and in order to stay one step ahead of their competition. Developing this information, and keeping it private, is hugely important for such businesses.
One of the ways a company can lose their competitive advantage is if an employee reveals this kind of information to the public or to a competitor. In order to make sure this doesn’t happen, employers can take a closer look at employment contracts to make sure they have the protections necessary for their trade secrets.
In this article, we’ll go over how to navigate the intersection of employment law and trade secrets by explaining the best practices for business when drafting employment contracts.
What Are Trade Secrets?
Under California’s Uniform Trade Secrets Act (CUTSA), a trade secret is defined as something that gets its economic value (or could do so) by being unknown to the general public or the other types of people who could use the information to make money. It is also something that the company that is in possession of it tries to keep secret.
This could include a wide variety of different types of information, and examples include:
- Computer programs,
- Customer lists,
- Data collections,
- Pending patents,
Employment Law and Trade Secrets
In California, because of a provision in the California Labor Code, everything an employee creates or acquires via his employment is the property of his employer. This means that information or processes important enough to be deemed trade secrets that are developed by an employee on the job, automatically belong to the employer.
The CUTSA establishes that when seeking legal action against employees who have stolen or shared trade secrets, an employer needs to prove that their trade secrets have been misappropriated. Trade secret misappropriation can include things like theft and espionage, but can also be as simple as an employee sharing information they had a duty to keep secret.
However, many businesses take extra steps to make it easier to win in court and to communicate the expectations to their employees more clearly. One such step is including a Non-Disclosure Agreement (NDA) as a part of the terms of employment in a new employee’s contract.
In such an NDA, the business can specify precisely what information the employee must keep secret. In addition, it can stipulate the specific types of information disclosure that are forbidden, such as helping a competitor reverse engineer the company’s product. Such stipulations are effective at protecting the rights and interests of both employers and employees and making dispute resolution more straightforward.
While businesses in some states attempt to protect their competitive advantage by using non-compete agreements, such agreements are not legal or enforceable in California. This can have repercussions for an NDA as well: for example, if the language of an NDA is so broad that it in effect restricts the employee’s ability to work, then it may not be upheld in court.
Working With Our Employment Contract Lawyer At Ruben P. Ruiz PC
If you’re looking for an employment lawyer who knows the ins and outs of the industry and can help you protect your trade secrets, look no further than the law offices of Ruben P. Ruiz PC. Partner Lisa Chapman has a great deal of experience in the field having worked for over 30 years in both Federal and State courts.
If you’re looking to protect your business’s secrets and competitive edge, fill out the form below to contact us today and set up a consultation.