Archive for the ‘Employee Contracts’ Category

I’ve blogged before about the need for drafting and updating your employee handbook: https://damnedif.com/category/personnel-policy-fun/

I know, handbooks are boring. But you know who they are not boring too? That plaintiff’s lawyer who wants to take your company for a million dollars. She’ll do her job and read every word of your employee handbook that you haven’t bothered to read in, what, three years? She’ll find every ambiguity, every outdated policy, every discrepancy with how you do things. And she’ll smack you in the mouth with all of them at deposition or trial.

Here are just some of the ways that you can screw yourself with your employee manual.

  1. You have policies that you don’t follow.

Every employer has policies and provisions in the manual that they do not really follow. They are outdated, irrelevant or ignored. Get rid of them. They serve no purpose other than showing how you don’t follow your own manual, which can be used in a variety of ways to make you look bad in litigation.

  1. You have no or an outdated sexual harassment policy.

Massachusetts is serious about sexual harassment, as it should be. Employers with six or more employees by law must have a sexual harassment policy. You also must provide the policy to new employees, and to all employees yearly. Our diligent plaintiff’s attorney will certainly use it against you if you don’t do these things. They may also use it against you if do not train employees – at least your supervisors (which is recommended, but not required, by Massachusetts law). Your company is automatically liable if a supervisor commits sexual harassment of a subordinate. Training takes about an hour, so just get it done.

  1. You don’t include disclaimers and at-will language.

All the lawyer speak in modern employee manuals are nauseating, but strictly necessary.  Why?  Because the Massachusetts courts have told us so.  If you fail to put them in there, you may have bound yourself to a contract whereby you have all the obligations of performance. If you fire an employee or take other action, you may have breached the “contract.” This would be like winning the Darwin Awards, employer version.

  1. You don’t have a comprehensive leave policy.

There are many types of leave required by federal and state law. You can’t simply stick your head in the sand and give people time off whenever they need it. No good deed goes unpunished. If you give one person leave and not another, you may just have committed discrimination. Unless you are okay with a “come in when you feel like it” policy, you need to address vacation time, military leave, jury duty leave, sick leave, family and medical leave, small necessities leave, maternity leave, domestic violence leave, voting leave, etc.

  1. You restrict NLRA rights.

Even non-union employers now have to worry about the National Labor Relations Act, which historically was thought to apply only to union employees. Employees have rights to engage in “concerted” activities regarding the terms and conditions of employment. Your policies regarding standards of conduct, social media, distribution of materials in the workplace, confidentiality, etc. could inadvertently run afoul of the statutes and land you in hot water.

  1. You have an overly detailed and rigid progressive discipline policy.

This is a rare occasion where non-specific may be better. If you are too rigid, you may create a presumption that employees cannot be fired unless you progress through the stages of discipline. Moreover, if you do not follow your explicit policy to the letter in every occasion, you will open yourself up to claims that you treated employees differently on the basis of gender, race, religion or other protected class. This is not just theoretical. It was a costly lesson for an employer in a recent Massachusetts case.

  1. You have wage and hour policies that violate the law on their face.

If you are going to have wage and hour policies in your handbook, including overtime, comp time, and break polices, make extra sure that they are accurate and up to date. Wage and hour law is very detailed and frequently changes. I often see employers unwittingly put their illegal policies in writing, which will make our hypothetical plaintiff’s lawyer very, very happy.

  1. You inadvertently run afoul of the federal ERISA law.

If you are not careful about how you describe your employee benefits, you could trigger compliance with strict obligations under federal law. Don’t do that.

In summary, dust off your employee handbook in your bottom draw and have your employment lawyer review and update it. Out of sight may be out of mind, but that won’t keep you out of court.

By Adam P. Whitney, Esq.

617-338-7000

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Drafting and updating employee manuals, also called personnel manuals or employee handbooks, is a lot like getting your annual medical check up. It’s no fun to do, but we know that it’s an important part of our overall health maintenance. Making sure that your employee handbook is compliant and up to date is an important part of your company’s overall plan to keep good relations with your employees, and to stay out of disputes and lawsuits.

 

There are now many websites, some for free, that allow you to create your own employee manual. Most are actually pretty good. And a dirty little secret of employment lawyers is that many of us use these sites too, either as a starting point, or to find some better language.

 

Can you bypass your lawyer and create your own employee manual? No, at least not completely, because “pretty good” is not always good enough. With some effort, you can probably create an employee handbook yourself that is 80% to maybe even 90% accurate and complete. But it’s that missing/inaccurate 10-20% that will kill you.

 

Here’s why. There is no one-sized fits all handbook. First and foremost, different states have different statutory and common laws. Some of the standard provisions from handbooks created for a national audience would cause direct violations of Massachusetts laws (it’s akin to drinking bland, national beer, when you could be drinking Sam Adams, Harpoon or Pretty Things). Plus, you may be inadvertently placing unnecessary burden’s on your company. For example, you don’t want to obligate your company to comply with the FMLA if you only have 20 employees. There are many different state and federal statutes that apply to different businesses, usually depending on the number of employees.

 

Additionally, every industry and every business is different. There may be different provisions that you absolutely need for your industry. Different statutes you have to follow. There may be other provisions that fit or do not fit with your workplace culture.

 

But you should still benefit from the cost-effectiveness of having free or very reasonably priced personnel manuals readily available on the internet. If you want to manage legal costs, go ahead and create the employee handbook from a reputable site on the web. A good human resources professional could probably create a very good (90% or so) manual in this fashion with a few hours of effort. But don’t stop there. Have your trusted employment attorney spend a few hours to get your manual up to 100%.

 

The above discussion could apply in varying degrees to other employment and business documents, such as non-competes, non-solicitation agreements, confidentiality agreements, service contracts, etc. If you want to save legal dollars, sometimes you can think of the web as a starting point. But unless you see webmd.com as a viable alternative to a visit with your trusted primary care physician, don’t make it your ending point. Saving a few thousand dollars now could cost you tens or hundreds of thousands and a lot of heartache later.

 By Adam P. Whitney 617.338.7000

You may have signed many contracts with boilerplate language whereby your company agreed to indemnify and “hold harmless” the other contracting party.  Most people have some concept of what this means, but really do not think through the ramifications of such an agreement.  Whenever possible, delete these provisions from any contract provided by the other party.  If you are forced to agree to indemnity clauses, have your lawyer suggest reasonable changes and explain your company’s risk.  Also, check with your insurance agent to see what will be covered.

The word “indemnify” is usually thought to refer to claims by third parties who are not parties to the contract.  If your company agrees to indemnify ABC company, your company will pay any judgment as well as the cost of defense.  Hold harmless, in the opinion of some legal minds, is slightly different; this could mean that you will not sue ABC company if a third party sues your company for something that ABC company allegedly did wrong.  Both indemnity and hold harmless agreements are subject to judicial review for public policy and reasonableness, and certain statutes apply, both of which can temper their literal interpretations.  However, your best option is either to not sign them at all, or insist on some reasonable parameters.

Even lawyers do not completely understand all of the complexities of indemnity and hold harmless provisions.  Often, these are inserted as boilerplate provisions, with little thought by the lawyer about what they mean.  Many lawyers who draft such provisions are contractual lawyers, not trial lawyers, so they do not fully appreciate the practical implications of indemnity and hold harmless provisions.

Vague indemnity and hold harmless provisions create a lot of unanswered questions.  Do you have to indemnify ABC company if it was negligent?  If it committed an intentional act?  If it sexually harassed someone?  If one of its drivers caused a fatal auto accident?  Can ABC company hire any lawyer it wants to defend it from a third-party claim?  A law firm that charges $500 an hour?  Can the firm engage in a scorched earth defense on your dime?  Can ABC settle the claim for any amount and make you pay it?  Do you have any say in the selection of lawyers and defense of the case?  Does the indemnity provision prohibit you from suing ABC company if it harms your company? Will you have to pay ABC’s legal fees if you sue it?

If you do not know the answers to these questions, or the provisions are simply silent, you need a lawyer to write better provisions.  Plain English is preferable to archaic language that lawyers and courts interpret differently.

The same applies if the coin is flipped and you require ABC company to indemnify you and hold you harmless.  You don’t want to have to rely on vague provisions.  Get the protection you need specified in clear language.

If you have a question about any indemnity and/or hold harmless provisions, call me at 617.338.7000.

By Adam P. Whitney

You’re a high level or very successful salesperson or other professional with a noncompete agreement or a nonsolicitation agreement, or the like. Your boss is a dysfunctional tyrant. You want to leave to start your own business. Or you’re a partner, LLC member, or shareholder of a small business and it is not working out. How do you form an exit strategy?

There is no one size fits all strategy, as each situation and set of legal documents are unique. I’ve represented a number of clients in these situations. Although I’m usually on the business owner’s side, representing these clients is rewarding because I help them to leave an intolerable, or at least undesirable, situation. They then become business owners and employers themselves.

Here’s the good news. You can make the leap from indentured employee to successful business owner. Although the first steps are hard, you will probably never look back. You’ll wonder why you didn’t do it sooner. Many of your clients will eventually do business with you. You’ll grow your business and get new clients. You’ll wonder why you ever feared that dysfunctional tyrant who you called your boss, and regret that he got rich on your talent and efforts.

Here’s the bad news. That dysfunctional tyrant may make it hard for you to leave. He may hire expensive lawyers to try to bury you in litigation fees and to get a court order to stop you from earning a living and feeding your family. You will incur some legal fees fighting this, and there is no guaranty that you will win.

I’m not going to lie and tell you that it’s easy, but if you believe in yourself and your abilities to do it better than that dysfunctional tyrant, I can promise that you can get through it, and be a whole hell of a lot happier in your life. I can also promise you that we can come up with a strategy for your situation which, as stated above, must be determined on a case-by-case basis.

No matter what your strategy, there are some basic do’s and don’ts for every employee (or partner, etc.) who is contemplating or planning on leaving to start another business or even to go to another employer. These are common sense, but people get them wrong in their zeal to succeed in their next endeavor. Basically, be honorable and treat your employer the way you would want and expect to be treated once you are the boss of your own business, even if the tyrant doesn’t deserve it.

Do continue to be loyal to your employer. Keep servicing the clients. Keep reporting to the boss. Do your job.

Don’t solicit or recruit clients to come with you while you are still on your boss’ dime. Although this is very tempting, and it would be comforting to know if your best clients will follow you, avoid the temptation. You owe your employer a duty of loyalty and good faith. Moreover, you will look like a dishonest sneak if it comes out in court that you were doing this.

Don’t steal any customer information, company trade secrets, etc. You can recreate your customer list from memory and using the internet (or you may have them socially networked anyway), so don’t do a bush league move and e-mail yourself a list of customers. If you do that, you become the bad guy, and the dysfunctional tyrant looks like the victim.

Don’t assume that non-competes and other restrictive covenants are not enforceable. Generally, they are enforceable. But there may be ways to work around them. You need to consult with a lawyer to understand what you can and cannot do, and what your risks are for doing it.

Do document everything that could support a claim against your employer. Sometimes the best defense is a good offense. If your employer is not paying you commissions, is doing something unethical, sexually harassing you, etc., etc., you may have a good legal or practical defense to get out of a non-compete.

If you’re an interest holder, such as a stockholder of a small corporation, a member of an LLC or a partner in a partnership, there are special considerations. You will need someone to review your company documents to see if there is any built-in exit strategy.

If you are ready to leave the dysfunctional tyrant, give me a call at 617.338.7000. Assuming I have no conflicts of interest (I represent mostly business owners, but none of them are dysfunctional or tyrants), I can discuss some of the options available to you.

By Adam P. Whitney.

If you don’t understand the law of noncompetes, you are less likely to have an enforceable agreement. The below is a basic overview that I wrote for another site. If you have any questions on noncompete or nonsolicitation agreements in Massachusetts, give me a call at 617.338.7000.

What is a Noncompete?

A Noncompete (also called a noncompete agreement, a non-competition agreement, or a fair competition agreement) is a general term for a written agreement whereby an employee agrees that, after he leaves the employer’s employment, he will not take a job with a competing business. Noncompetes usually contain various other provisions to protect the employer, such as not allowing the employee to solicit customers of the employer after the employee leaves.

Noncompetes are seen most often in sales jobs (to protect goodwill, described below) and in high technology jobs (to protect confidential information and trade secrets, described below). Some jobs involve both of these issues. They are prevalent in other types of jobs and in various industries.

Are Noncompete’s enforceable?

Yes and no. It depends. Typical lawyer answers, but they are the right answers here. Noncompete agreements are enforceable, but only if they protect a legitimate business interest and only to the extent that the legitimate business interest is reasonably in need of protection. Forget about what your cousin Joe or your sales buddy down the hall says. Only a competent lawyer can tell you if a particular agreement is likely to be enforced.

“Noncompete” is somewhat of a misnomer because Noncompetes are not enforceable solely to prevent fair competition. Public policy is in favor of free competition and the courts, therefore, look at Noncompetes very carefully before they enforce them. Only two legitimate business interests have been recognized in Massachusetts: (1) confidential information or trade secrets; and (2) goodwill.

Confidential information and trade secrets are valuable business assets that are worthy of protection. For example, a high technology employer may have developed software, equipment, etc. If an employee were to go to work for a competitor, the employee might provide the information to the competitor, thus greatly harming the original employer.

Goodwill simply means the reputation of the employer in the mind of a specific customer. The customer has a good impression of the business and will continue to do business with the company. Courts recognize that a salesperson is the face of the company, and customers can associate the goodwill toward the company with the individual salesperson.

There are a number of other reasons why a court may not enforce a Noncompete. Each case is determined on a case by case basis. Courts are sensitive to the fact that employees need to earn a living. Accordingly, they may examine every aspect of the Noncompete and the circumstances surrounding the agreement, as well as the equities involved in enforcing the Noncompete and the potential harm to be caused to the employee and the employer. The agreements are “strictly scrutinized,” in the words of the courts.

Can a Noncompete be enforceable even if the employer fires the employee?

The answer is the same as above (it depends). Most Noncompetes will state that they are enforceable even if the employer fires the employee, but the court may find this to be inequitable.

Can an employer have its employees sign Noncompete solely to prevent future competition?

No. At last, a straight answer from a lawyer. As stated above, Noncompetes are a misnomer because they are not enforceable if there only purpose and effect is to restrict otherwise legal competition. There must be a protectable interest, as described above, for a Noncompete to be enforceable.

Are there any limits on a Noncompete?

Yes. The Noncompete will only be enforced, if at all, to the extent that it reasonably protects the employer’s legitimate business interests (things are different, however, if the Noncompete is tied to the sale of a business). For example, if an employer only operates in the Boston area, it is unlikely that a court would rule that the former employee could not work in Springfield. Also, a court will only enforce a Noncompete for set period, normally a year or two, sometimes three years.

Also, certain jobs are not appropriate for Noncompetes. For example, the courts will not enforce a Noncompete against a doctor. The reasoning is that patients should be able to choose their own doctor, and if a doctor was prohibited from working at a competitor (or prohibited from working with patients), the patient would not be able to choose the doctor. A similar rule applies to lawyers.

What advice is given to an employer to make their noncompete enforceable?

There are several considerations. The first is to carefully consider why a Noncompete is needed and what legitimate business interest is in need of protection. If confidential information or trade secrets are at issue, the employer must take reasonable steps to protect the information and treat it as confidential. Otherwise, no protection will be given. If goodwill is at issue, the Noncompete should contain specific nonsolicitation provisions addressing the specific danger the employer wants to protect against.

It is most important to have a well-drafted written agreement that is specific to the employee and the situation. Make sure the agreements are up to date with an employee’s job changes and changes in salary and other employment terms. Also, some courts are requiring separate consideration (a sum of money or some other benefit) over and above continued employment to make a Noncompete enforceable.

How can an employee get out of a noncompete?

There is no magic bullet. Unless your employer agrees to waive your noncompete, or unless a court rules that the noncompete will not be enforced, the noncompete will stick with you for its duration (typically one year). This can be burdensome because you should tell new employers that you have a noncompete agreement. Employers in certain industries will ask you if you have one. Even those employers who do not ask should be told if the new job will implicate the noncompete. Your new employer will not be happy with you if they receive a nasty letter from your old employer’s attorney if that is the first time that they are finding out about the noncompete.

How does the employer enforce the noncompete?

The employer should consult with a qualified attorney with experience litigating these types of cases. The attorney can assess the situation, review the noncompete language, and determine the best course of action based on the employer’s goals and budget. I do not recommend that you use a general practice attorney as there are many tricks of the trade that could make or break your case. Possible courses of action include the following: (1) do nothing because the Noncompete is likely not enforceable and/or because it will not be cost effective to enforce it; (2) start by sending a letter to the new employer demanding that they respect the Noncompete; or (3) filing a suit in court and asking for a preliminary injunction (described below).

What does the employee do if he is sued for violation of a noncompete?

The employee should hire a competent lawyer to defend the case and/or to try to resolve the matter with the employer. Ignoring the matter will not make it go away. Usually, the employee will have only a very short period time to respond to the employer’s request to obtain a preliminary injunction (described below).

What is a preliminary injunction?

It’s a fancy term for a court order telling someone that they cannot do something. You would be crazy to violate a court order, because you could face significant sanctions or even be subject to arrest and jail. In noncompete litigation, the employer will ask the court to issue an order that the employee cannot work for a certain employer or a certain class of employers for a certain length of time. These injunction requests are sometimes successful, and sometimes not. Much depends on the facts of the case, the strength of the agreement, and the skill of your lawyer.

Adam P. Whitney. 617.338.7000.

Much of what you may think you know about employment contractual issues could be wrong. Is your company exposing itself to liability because of misinformation or a lack of information about contracts? Employment law creates traps for unwary employers. For example, you could be damned by a poorly drafted commission plan, which could subject you to triple damages, costs and attorneys’ fees even where you think an employee is owed nothing. You could be damned by your own personnel manual, which inadvertently creates contractual rights in employees. You could be damned by firing a minority owner of your business (stockholder, partner or LLC Member) without legal advice. Here is a brief guide, which just scratches the surface of these complex issues.

Does a Contract Have to Be in Writing?

Yes and no. Ideally, every employment agreement should be in writing to clarify the rights and obligations of both parties. Sometimes, a simple offer letter will do. To some extent, oral contracts can be enforceable if they can be performed within one year. If the contract cannot be performed within one year, then it must be in writing to satisfy the statute of frauds. Like many things in the law, there are exceptions to these rules. For example, if an employee relied on an oral promise of a contract for a term of years, the employee might be able to enforce the oral promise using the court’s equitable powers? Also, a promise of employment for life can be performed within one year because anyone can die within a year. Thus, an oral promise of employment for life can be enforceable.

Does a Partner in a Partnership, a Shareholder in a Small Corporation, or a Member of an LLC Have Rights Against Being Terminated by the Majority Owners?

Yes, to an extent. This is a very complicated area of the law and depends on the specific facts of each case. In general, if the owner-employee has a reasonable expectation of continued employment, he cannot be fired unless there is a business purpose for the firing and no less harmful alternative. This is because the majority owners owe the minority owner the utmost duty of good faith and fair dealing. Thus, majority owners should seek sound legal advice before terminating or taking other action against a minority owner employee.

Can Other Employees Be Fired Without Cause?

The general rule is that, if an employee is “at-will,” which means that the employment is not for a specified period of time and there is no contractual protection to employment, the employer can fire the employee for any reason or for no reason. If an employee has a specific contract (or if a personnel policy creates rights against termination, as set forth below), usually the employer can terminate the employee only if there is “cause” to do so. Well-drafted contracts define the specific “for cause” reasons for termination.

Also, there are dozens of statutory and common law protections which protect employees from discrimination and other matters. Thus, if the employer terminates the employee without cause, the employee may believe that there is a discriminatory or other reason for the termination.

Does the Employee Manual or Personnel Manual Create an Employment Contract Giving Rights to the Employee?

Yes, no, maybe. Typical lawyer answer, I know, but it is the right answer. A well drafted manual usually will not create contractual rights in favor of employees. However, there are reported cases where a poorly drafted manual inadvertently gives rights to employees that prevent their termination without cause. Employers should have their manual reviewed by a qualified employment lawyer to protect themselves from suit.

Can an Offer Letter Create an Employment Contract for a Term?

Yes. Employers can unintentionally create an implied contract for a term by the wording in an offer letter. Employers should have their offer letters reviewed by a qualified employment attorney before sending them.

Should Employees Be Told of the Reason for Termination?

Probably, but it depends on the situation. What employers should not do is lie or tell a half-truth, even to save the employee’s feelings. This does not mean that the employer has to be harsh or intentionally hurt an employee’s feelings, but if you do not tell the truth at termination and you are then sued, it’s hard to change your story later. The employee’s lawyer will accuse you of changing your story and that your real reasons were discriminatory. Also, you should document the reason for the firing. Employment lawyers have a saying – if it is not in writing, it didn’t happen.

Additionally, there are new statutory requirements about what employers must put in an employee’s personnel file and how the employer must inform the employee of any negative information. All employers should review these new requirements with a competent employment attorney.

Can an Employment Contract Control over Statutes and Common Law?

Generally, no. Although parties are free to set forth the terms of the employment in writing, there are limitations. For example, employees must be paid minimum wages and must be paid either weekly or bi-weekly. These rights cannot be contracted away. An employer also could not have an employee waive an employee’s rights under anti-discrimination or other protective statutes, such as the Family and Medical Leave Act. However, unless there is some statutory or public policy prohibition, parties are free to tailor their agreement as they see fit.

Are Contracts Requiring Arbitration Enforceable?

To some extent, yes, if the contract is well-drafted, fair and reasonable. An employee is always allowed to challenge whether there is a valid arbitration provision, which is an issue for a court, not an arbitrator. Arbitration can also be waived by the party seeking to enforce it. Also, arbitration clauses cannot prohibit employees from filing with the Massachusetts Commission Against Discrimination, or from filing wage claims or other claims with the Attorney General or other governmental entities. Arbitration issues are complex, so if you are an employer who seeks to enforce an arbitration clause, make sure you have it reviewed by a competent employment attorney.

Can an Employer Make Sure that a Worker Is Not Classified as an Employee by Entering Into an Independent Contractor Agreement?

No. In Massachusetts, there is a strict three-part test for determining whether someone providing services for your company is an employee or independent contractor. This is a complex legal and factual question, but in general, if the individual is providing services within your line of business, or you have some control over the individual’s work, or if the employee does not have his own business or profession, the individual will likely be deemed to be an employee. There can be severe penalties and liabilities for misclassifying a worker as an independent contractor, so have a competent employment lawyer review this issue for you.

Does an Employee Have any Rights and Remedies if a Contract Has Been Breached?

Usually, but it depends on the wording of the contract and whether the employee has suffered damages. Employees will normally have a duty to mitigate damages. Thus, an employee must seek another comparable job after termination. The normal damages would be the loss of earnings during the contract term, minus amounts earned or which could have been earned in mitigation. There could be other damages, depending on the wording of the contract and the situation.

Does an Employer Have to Provide Severance Pay?

Generally, no, unless there is a contractual right or a specific, enforceable policy to do so. There may be exceptions to this general rule, but the exceptions do not apply to most employers and employees.

Does an Employee Have a Contractual Right to Bonuses and Commissions?

Yes, no, maybe. Commissions and bonuses are creatures of contract, but can potentially be enforced through payment of wages statutes. One must first look at the specific wording of any written contract or compensation plan, and also examine the course of dealing of the parties and the standards in the industry. If an employer has a vague commission plan or one that favors the employee, the employee may have a contractual right to commissions, even after termination. Worse yet, the employee could be entitled to triple damages and attorney’s fees, litigation costs and interest. Thus, any commission or bonus plan must be very carefully crafted by a competent employment attorney. A “bonus” is usually thought of as being wholly discretionary and, thus, not subject to contractual or statutory rights. However, “bonus,” is just a word used and the word itself does not control. Employers can inadvertently create employee rights to a “bonus” by a poorly worded compensation plan or a course of dealing.

Can an Employer Make any Employee a Salaried Employ by Putting that in the Contract?

No. There are specific guidelines under federal and state law regarding who is an “exempt employee” and who is a “non-exempt employee” for overtime purposes. Contrary to the belief of some employers, you cannot simply pay any employee a salary and not expect to keep track of their hours and pay overtime. You must first determine whether the employee meets the exempt guidelines, which can be very complicated. For example, lawyers and doctors are professionals and can be paid on a salaried basis, as can some (but not all) executives, managers and computer programmers.

The above is not meant to be legal advice, but merely general information. Employment law is extremely complex, and legal advice cannot be given without a full review of the facts and the law. The above may or may not apply to any particular employer or employee.

By Adam P. Whitney 617.338.7000.

If you hire a new employee from a competitor, you should make damn sure that the employee did not bring any trade secrets or proprietary information from the former employer. Otherwise, you could face significant exposure to your company, especially if others at your company participated in use of the trade secrets (the term “trade secrets” can be broad to include any proprietary business information, including customer lists and customer information).

This is the lesson of the attached case report, People’s Choice Mortgage, Inc. v. Premium Capital Funding d/b/a Topdot Mortgage. In the interest of full disclosure, I was the trial attorney for People’s Choice Mortgage (“PCM”), the prevailing party in the case.

The following is a summary of the case report, which is a public record: PCM employed Mr. Bodden, who turned out to be a dreaded Rogue Employee. Mr. Bodden then went to work for Topdot while still employed at PCM, and kept working for PCM for an additional five weeks. Bodden had access to PCM’s customer information. Because his commission structure was better at Topdot, Bodden used the PCM documents at Topdot to solicit and close loans. The Court concluded that Topdot had constructive knowledge that Bodden was using PCM documents. The case report makes for an interesting read.

The awards themselves against Topdot and Boddon were not large. PCM prevailed against Bodden in the amount of $39,005 ($64,589.20 after interest). PCM prevailed against Topdot for $12,279, which was doubled to $24,558 under Chapter 93A, which became $31,773 with interest. The bigger award was the attorneys’ fees and costs award against Topdot of $88,170.57.

That comes to a total of $184,532 against Topdot and Bodden for their use of PCM’s trade secrets. Not to mention the costs that they incurred on their own attorneys and other legal costs, which could bring the total exposure to a quarter million dollars.

If you have any questions regarding how to protect your trade secrets, what to do if a former employee is using your trade secrets, or how to make sure a new hire is not exposing your company, call me, Adam P. Whitney, at 617.338.7000.

Findings of Fact, Rulings of Law, and Order for Judgment