Unfair competition is a commonly used term that can describe a variety of unlawful business practices. With regard to the employee-employer relationship, unfair competition generally pertains to the following types of misconduct: (1) misappropriation of an employer’s trade secrets or confidential information by an employee; (2) breach of a restrictive covenant agreement entered into between an employer and an employee; and (3) breach of the employee’s duty of loyalty to the employer. Employers in New York are often concerned about protecting trade secrets, confidential information and customer relationships from employees who leave their employment to work for a competitor. Because non-competition agreements are generally disfavored in New York, it is recommended that the employer, in order to put itself in the best position to avail itself of the foregoing causes of action against unscrupulous employees and competitors, and to protect the confidential information, trade secrets and customer relationships it worked so hard to develop, engage in the following practices from pre-hiring through post-employment.
Employer First Must Get Its House in Order. The employer must take an inventory of information that it deems confidential, ensure that such information is, in fact, treated as confidential and that its trade secrets are in fact secret. In order to claim that an employee is unlawfully misappropriating “confidential information,” it is imperative that the employer, in the first instance, be able to demonstrate that it has protocols in place to ensure the confidentiality of its information. Examples of such protocols include: (1) controlling access to the confidential information through locked file cabinets, passwords, and keeping highly sensitive information (i.e., customer lists), on restricted computers and the like; (2) being able to demonstrate the cost to develop customer lists, contacts, and other confidential information; (3) establishing agreements with customers to address unauthorized disclosure of protected information; (4) designating documents as confidential through the use of confidential stamps or designation; (5) establishing a line of “need to know” persons with regard to company business information; (6) using memoranda/emails to reinforce confidentiality internally (i.e., have employee confirm receipt of confidential information); (7) controlling how and where employees are allowed to maintain confidential information—make sure no extra copies are allowed and include “confidential” electronic headers on all confidential information that is being distributed to employees via email; (8) using printer and copier logs to identify the information being printed if possible; and (9) being mindful of what is included on the employer’s website as it will be difficult to claim something is confidential if it is contained on a website.
