CA Court Favors Employees in Trade Secret Decision
Posted by
michael
on from the sanity-prevails dept.
legal_tinker writes "At grep.law, Tait Graves writes: 'In a majority of states, you can be enjoined from starting a new job because of what you know, even if you have done nothing wrong.' A California court just rejected that idea in California."
Re:People Laid off from my company
by
rodgerd
·
· Score: 5, Informative
I can work for whoever the hell I want to work for.
This is true in New Zealand to a large extent. The courts have consistently ruled that restraints of trade in employee contracts (a) cannot stop someone earning a living in their chosen field and (b) must be specifically compensated (that is, if you want me to sit on my hands for six months, you have to pay me something for that six months, not just claim my regular salary covers it).
The only provisions which have been consistently upheld here are the ones relating to forbidding employees from soliciting clients or co-workers from their now ex-employer. Also, all bets are off in the case of redundancy (you can't sack someone and then prevent them from earning a living).
Unfortunately, the popularity of the absurdly facistic contracts becoming standard in the US ("We own everything you've ever thought of now aand for ever and you can never work for anyone doing anything more meaningful than burger-flipping again") has influenced many New Zealand companies in the direction of putting illegal provisions in their emploment contracts - either because they're too stupid to consult a competant employment lawyer, or because they're cynically hoping the threat of legal action will allow them to beat employees into line.
If companies put a fraction of the effort they put into trying to terrorise employees into making them happy while they're still at the company they'd probably get better retention of key personel.
Blue pencil rule
by
kefoo
·
· Score: 3, Informative
Fortunately here in Ohio (I don't know about other states) we have a law called the blue pencil rule. It allows a judge to rewrite a non-compete clause in an employment contract if it's too restrictive and prevents someone from finding new employment.
Slight clarifications
by
werdna
·
· Score: 4, Informative
Reading the comments, I notice that readers are confusing or conflating various issues -- not terribly, but it may be interesting to understand the various bodies of law applicable here:
1) Trade secret law. This is the body of law that prevents you from using or disclosing certain information disclosed to you, directly or indirectly under certain circumstances amounting to a "confidential relationship." You get nailed either by using or disclosing, or by threatening to do so. Virtually every state has strong TSL. TSL is a species of intellectual property law.
2) Covenants not to compete. This is the body of law governing the enforceability of contract provisions stating that a person promises not to compete with a business entity. State laws vary widely as to enforceability. Some completely prohibit these provisions. Others enforce them skeptically, depending upon their "reasonability." Still others have detailed rules for reasonability as to time and space limitations. Others limit to whether the covenant is necessary to protect a reasonable commercial interest. CNC is a species of antitrust regulation.
3) Inevitable Disclosure Rules. This is the DMCA of trade secret law, and this was the subject of the case here. Various jurisdictions (including, alas, Florida) have taken to the view that enforceable non-compete-like protections can be given, without express covenant, to protect a trade secret when a former employee undertakes a job where the disclosure of the secrets is an inevitable consequence of working there. It is a monster, because it invades and disfigures both trade secret AND covenant policies: ID, like trade secrets, potentially last forever and have no territorial bounds. And ID, like covenants, require no proof of bad intent or misappropriation -- even threatened misappropriation. ID, like DMCA, is neither antitrust nor intellectual property -- it is merely naked technology regulation.
Since covenants and trade secrets, respectively, embody a complex set of balancing issues and policies -- ID, by rejecting those policies, unmoors trade secrets and covenants law from their fundamental justifications, and therefore is as likely to hurt the economy as help it. Like the DMCA, which unmoors copyright law from its fundamental policies, ID risks creation of dangerous rights in gross to a few powerful litigious corporations, with no useful payback to society.
4) "Right to work" law, so far as I know, is simply a euphemism for the proposition that an employer is free to hire or fire any employee on any given day, and cannot be held to contract (union or otherwise) regarding employment on any other basis. Basically, it makes illegal the old union notion of a closed shop. (In this arena, I am no expert, but folks seem to be misusing the term here.) RTW is a species of employment law, slightly akin to a backwards version of antitrust.
Slashdot Mirror
This is true in New Zealand to a large extent. The courts have consistently ruled that restraints of trade in employee contracts (a) cannot stop someone earning a living in their chosen field and (b) must be specifically compensated (that is, if you want me to sit on my hands for six months, you have to pay me something for that six months, not just claim my regular salary covers it).
The only provisions which have been consistently upheld here are the ones relating to forbidding employees from soliciting clients or co-workers from their now ex-employer. Also, all bets are off in the case of redundancy (you can't sack someone and then prevent them from earning a living).
Unfortunately, the popularity of the absurdly facistic contracts becoming standard in the US ("We own everything you've ever thought of now aand for ever and you can never work for anyone doing anything more meaningful than burger-flipping again") has influenced many New Zealand companies in the direction of putting illegal provisions in their emploment contracts - either because they're too stupid to consult a competant employment lawyer, or because they're cynically hoping the threat of legal action will allow them to beat employees into line.
If companies put a fraction of the effort they put into trying to terrorise employees into making them happy while they're still at the company they'd probably get better retention of key personel.
Fortunately here in Ohio (I don't know about other states) we have a law called the blue pencil rule. It allows a judge to rewrite a non-compete clause in an employment contract if it's too restrictive and prevents someone from finding new employment.
Reading the comments, I notice that readers are confusing or conflating various issues -- not terribly, but it may be interesting to understand the various bodies of law applicable here:
1) Trade secret law. This is the body of law that prevents you from using or disclosing certain information disclosed to you, directly or indirectly under certain circumstances amounting to a "confidential relationship." You get nailed either by using or disclosing, or by threatening to do so. Virtually every state has strong TSL. TSL is a species of intellectual property law.
2) Covenants not to compete. This is the body of law governing the enforceability of contract provisions stating that a person promises not to compete with a business entity. State laws vary widely as to enforceability. Some completely prohibit these provisions. Others enforce them skeptically, depending upon their "reasonability." Still others have detailed rules for reasonability as to time and space limitations. Others limit to whether the covenant is necessary to protect a reasonable commercial interest. CNC is a species of antitrust regulation.
3) Inevitable Disclosure Rules. This is the DMCA of trade secret law, and this was the subject of the case here. Various jurisdictions (including, alas, Florida) have taken to the view that enforceable non-compete-like protections can be given, without express covenant, to protect a trade secret when a former employee undertakes a job where the disclosure of the secrets is an inevitable consequence of working there. It is a monster, because it invades and disfigures both trade secret AND covenant policies: ID, like trade secrets, potentially last forever and have no territorial bounds. And ID, like covenants, require no proof of bad intent or misappropriation -- even threatened misappropriation. ID, like DMCA, is neither antitrust nor intellectual property -- it is merely naked technology regulation.
Since covenants and trade secrets, respectively, embody a complex set of balancing issues and policies -- ID, by rejecting those policies, unmoors trade secrets and covenants law from their fundamental justifications, and therefore is as likely to hurt the economy as help it. Like the DMCA, which unmoors copyright law from its fundamental policies, ID risks creation of dangerous rights in gross to a few powerful litigious corporations, with no useful payback to society.
4) "Right to work" law, so far as I know, is simply a euphemism for the proposition that an employer is free to hire or fire any employee on any given day, and cannot be held to contract (union or otherwise) regarding employment on any other basis. Basically, it makes illegal the old union notion of a closed shop. (In this arena, I am no expert, but folks seem to be misusing the term here.) RTW is a species of employment law, slightly akin to a backwards version of antitrust.