Trade Secrets/Unlawful Use by Employees

EMPLOYERS MAY PAY for their
EMPLOYEES’ MISUSE of
FORMER EMPLOYER’S TRADE SECRETS

In late January, the Minnesota Court of Appeals decided that employers may be held liable if their employee unlawfully uses a former employer’s trade secrets or confidential customer information. The dispute involved the Minnesota Trade Secrets Act. The employee was working for his employer when he decided to take an offer at a new company. While at his new company the employee used confidential customer information he had received at his former employer to solicit customers. The former employer sued the employee and his new company claiming, among other things, that the new company was liable for the employee’s misuse of confidential customer information since the employee was the new company’s agent.

The court decided that if an employee is acting within the course and scope of his or her employment, the employer may be liable for that employee’s unlawful use of the former employer’s confidential customer information. The case was sent back to the trial court to determine whether the employee was acting within the course and scope of his new employment when he misused his former employer’s confidential customer information.

Obviously it is in your company’s best interest to determine whether a potential employee has signed a restrictive covenant or non-compete agreement. Even if the potential employee does not have such an agreement, employers may face liability if that individual misuses the former employer’s trade secrets or customer information.

Posted 6/4/1999