Coatings World - broadwaycheer

Trade Secrets and Employees:
Are you covering your Ass(ets)?

By Beth McDaniel, JD

& Steve McDaniel, PhD JD Technology Litigators

Secret formulas, manufacturing pro- cesses, financial information, future product plans, customer lists…what are your trade secrets and what are you doing to protect them from inadvertent or intentional misuse or misappropriation by your own employees? Trade secret protection is afforded to you as employer, but only if you the employer take reasonable steps to treat this information as confidential and you provide notice to employees of the status of the materials.

So, how do we protect sensitive, confidential material and processes in the face of iPhones and flash drives in the hands of our employees? It’s no longer good enough to lock up the secret formula under lock and key. Everything from a secret formula to an entire manufacturing process can be uploaded and emailed, recorded or photographed in an instant. An employee can literally walk out the door with the company in her pocket.

Taking measures to prevent theft or inadvertent disclosure of trade secrets is imperative in industries such as the paint and coatings industry that rely heavily on closely held manufacturing processes and formulae. So, in order to limit exposure to accidental disclosure or intentional misappropriation of the company jewels, you might be considering audio, video or computer monitoring of your employees.

What is the line between the legitimate
protection of trade secrets and invasion of
employee privacy? A prudent employer will
know the answers to several touchy ques-
tions. The laws relating to integrated em-
ployee monitoring are complex at times and
vary from state to state, but it is generally
recognized that the prevention of theft or
misappropriation of confidential business in-
formation is a legitimate business reason for
monitoring employee workspace. It is the
employer’s job to implement a suitable pol-
icy that falls within the confines of the law.

Can you record employee conversations?

Generally yes, but proceed with caution. Both federal and state laws govern the use of electronic equipment for purposes of wiretapping or eavesdropping (listening to conversations of others). There are both civil and criminal penalties for violations of these laws, and the laws vary from state to state.

The federal law allows the recording of phone calls and other electronic communications so long as one party to the conversation consents to the recording. A majority of the states have adopted wiretapping statutes based on the federal law. There are twelve states, California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington which have adopted more stringent standards, in which consent by all parties to the phone call is required. These twelve states are often referred to as the “two-party states,” however, if there are more than two parties on the call, all parties need to give consent. Although most of these statutes address wiretapping and eavesdropping, they also tend to apply to phone calls and in-person conversations. Regardless of the state, it is illegal to record a conversation to which you are not a party, don’t have consent and could not naturally overhear. In most states, it is also illegal to disclose the contents of any illegally obtained call or communication.

Courts have recognized employee consent through the use of written consents and policy manual provisions. The most important thing is that the consent is clear and unequivocal as to the employer’s actions. At all times, however, caution should be taken in taping employee calls, in that employees may be speaking to people in multi-party consent states.

Can I monitor my employees using hidden cameras? In most cases the answer is yes. Twenty-four

states have laws outlawing the installation or use of hidden cameras in private places. A private place is one where a person may reasonably expect to be safe from unauthorized surveillance. A number of these states specifically outlaw the use of hidden cameras in bathrooms and locker rooms or for the purposes of viewing nudity. In states where no specific law exists, the interests of the employer in using hidden surveillance cameras will be weighed against the employee’s expectation of privacy. In all cases, the expectation of an employee’s privacy in a bathroom will outweigh any interest of the employer.

On the other hand, courts rarely find that there is an objective reasonable expectation of privacy in any public place. Where an employer hired a private investigator to use surveillance equipment to videotape his employee while he was in his car in a parking lot at a wedding reception and while he was entering and leaving his home, the court found that such surveillance was lawful because the employee-plaintiff did not allege intrusion into any private place. See Salazar v. Golden State Warriors, No. C-99-4825 CRB, 2000 U.S. Dist LEXIS 2366, at *2, 5- 6 (N.D. Cal. March 3, 2000).

So you cannot catch your employees with their pants down (literally), but what about when the employee is in a restricted area of your manufacturing plant? With the exceptions listed above regarding bathrooms and locker rooms, quality control and theft prevention are legitimate reasons for videotaping employee activity. Courts rarely recognize a reasonable expectation of privacy in the workplace. See Marrs v. Marriott Corp., 830 F. Supp. 274, 283 (D. Md. 1992) (holding that where an employee was videotaped picking a lock on a desk drawer, the employee had no reasonable expectation of privacy in an “open office”); Cox v. Hatch, 761 P.2d 556, 563 (Utah 1988) (finding no reasonable expectation of privacy in a “common workplace”).