How To Protect Your Company's Trade Secrets From Employee Theft

Articles Tagged with: Alabama Business Litigation Attorney

How to Protect Your Company’s Trade Secrets From Employee Theft

If you were to ask a group of employers about possible exposures, most would likely tell you that their risks come from the outside. Not many would admit or even think to admit that there is a likelihood danger lurks within. Yet, employee theft is a huge and growing concern for American businesses, costing an average of $1.13 million each year per business. That sum doubles when theft goes on for five years, and more than quadruples when allowed to persist for 10 years. While embezzlement and check fraud account for the majority of employee theft cases, theft of trade secrets is also a major concern.

Your trade secrets are your bread and butter, as they are what makes your business unique. For this reason, you need to be proactive in the protection of them and ensure that, should a secret leak, you have the necessary measures in place to pursue swift and aggressive legal action. Our Birmingham employment attorneys can help you devise a strategy that will keep your trade secrets secure and your rights intact.

Utilize NDAs

Though nondisclosure agreements are not necessary to protect your trade secrets, they can be useful to define the scope of trade secrets and prevent any confusion as to what information is confidential. Also, when asked to sign an NDA, most employees are more careful about what information they do and do not reveal. Finally, an NDA can protect your rights to information that may otherwise not be considered a trade secret under federal or state law. For these reasons, you should have employees, vendors, contractors, partners, and any other party privy to confidential information sign a nondisclosure agreement.

Incorporate a Confidentiality Policy in Your Employee Handbook

Another great way to protect your private information is to include a section regarding how employees are to handle trade secrets and other confidential information in your employee handbook. For example, you can prohibit employees from taking confidential documents home or from emailing them outside of the company’s network. You can also prevent the use of personal email while in the office and limit cell phone use to designated areas, such as break rooms or areas where files cannot easily be accessed.

Have Employees Sign Non-Compete Agreements

Though the section of Alabama Labor Code dealing with non-competes was significantly altered in favor of employees in 2015 to void “[e]very contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind,” the new section, Section 8-1-1, provides exceptions for contracts that serve a protectable interest. Trade secrets fall under the category of a “protectable interest.” If an employee does come into access with trade secrets, and if he or she leaves the company for any reason, you can rest easy in the knowledge that he or she is not legally allowed to divulge confidential company information. If he or she does, he or she is subject to punishments and damages set forth by the law.

Discuss Your Options With an Alabama Business Lawyer

While there are other measures you can take to prevent the theft of trade secrets, including limiting access to proprietary information and collecting confidential documents upon termination, the aforementioned methods may prove to be the most effective. That said, to ensure that your NDAs, policies, and non-competes are valid, enforceable, and without loopholes, retain the guidance of a knowledgeable lawyer. Our Alabama team at Cloud Willis & Ellis can help you devise documents that leave little room for interpretation or confusion. Contact our team today to begin doing what is necessary to protect your business’s interests.

Resource:

securitymagazine.com/articles/88432-employee-theft-costs-us-businesses-50-billion-per-year

Important Considerations to Make When Deciding Between a Joint Venture or a Partnership

A joint venture and partnership may sound similar, but in actuality, they are two very different entities. It is true that both are used to combine talents, resources, and skills of several different individuals, but outside of this, the entities are treated quite differently. It is important for entrepreneurs and business owners to understand the differences between the two entities so that they can make the best decision regarding business formation for themselves and their potential partners. Our Alabama business litigation lawyers help individuals, corporations, and other business entities consider their options when teaming up with other parties and decide on the solution that is best for them.

Partnership Versus Joint Venture

In order to determine the best formation for your business goals, you need to first understand the definition of each. A partnership is often defined as the voluntary association of two or more individuals for business purposes. These individuals jointly own a business, split business-related responsibilities, and split profits. A joint venture, on the other hand, is the undertaking of a single defined project by two or more people. Individuals who participate in a joint venture work under an express or implied agreement, have a common purpose, share profits and losses, and have equal say over how the project is carried out.

Specific Considerations to Make

Because partnerships and joint ventures are completely different entities, they are treated differently from a legal standpoint. It is important for you to understand these differences before moving forward with any type of agreement.

Liability Issues: One of the biggest factors to consider when deciding between a partnership and joint venture is liability. Generally, members of a partnership are equally liable for all of the entity’s obligations. This means that each partner is responsible for the actions of themselves, the actions of other partners, and the actions of all employees. With a joint venture, however, each person is only liable to the extent of his or her investment in the corporation’s stock or in his or her interest in the LLC. If the joint venture is established via a contract as opposed to a corporation or LLC, each party is exposed to liabilities incurred by the venture.
Tax Considerations: When individuals operate under a partnership, they are taxed individually on their share of profits and losses. However, joint ventures may be taxed as a corporation or partnership, depending on how the venture was formed. Partners are taxed 20 percent of their income, whereas joint ventures are subject to a flat tax rate of 21 percent. There are pros and cons of each, which you should discuss with your Mobile business litigation lawyer
Fiduciary Duties: When individuals agree to work together under a partnership, they agree to uphold a fiduciary duty to one another. This includes duties of care, loyalty, and good faith to other partners and the entity. While co-venturers also have a duty to other partners of the entity, those responsibilities are not as finite and are limited to business activities of the venture.

Of course, there are several important considerations you should make before forming any type of business entity, but those regarding liability, taxes, and fiduciary responsibilities are the top three.

Work With a Business Litigation Lawyer

If you plan on forming a partnership or joint venture in Alabama, consult with an experienced business litigation lawyer before you solidify anything. The right attorney can help you make the proper considerations and form the entity that best helps you achieve your business goals. Call Cloud Willis & Ellis today to get started.

Breach of Fiduciary Duty Claims: The Basics

Under Alabama Code Title 7. Commercial Code § 7-3-307, any agent, director, officer, partner, trustee, or other representative of an organization has a fiduciary duty to certain persons and entities, including the principal, partnership, corporation, beneficiary, or any other person to whom a duty is expressly stated (such as via a contract). In order to comply with said duty, the fiduciary agent must comply with certain rules and requirements. For instance, the agent must do the following:

Act with loyalty towards the company;
Be diligent in his or her management of the corporation’s financial affairs;
Exercise unbiased and sound business judgement when making financial decisions on the company’s behalf;
Avoid self-dealing transactions in which company finances or assets are used for the benefit of an individual rather than the corporation; and
Avoid diverting potentially lucrative business opportunities away from the corporation and into another entity that a fiduciary agent controls or owns.

If it is discovered that an agent has violated any or all of the above responsibilities, he or she can be charged with a breach of fiduciary duty. Even if it was just a single person that committed a breach of duty, an entire organization can be held liable, especially if customer money, information, or assets were at stake. If there is an officer within your organization that has breached his or her duty, and if you either want to file a claim or seek protection, retain the help of an aggressive Birmingham business litigation lawyer for immediate assistance today.

Bringing a Breach of Fiduciary Duty Claim Against an Agent

If you suspect that a breach of fiduciary duty occurred and if you want to file a claim against the guilty party, you need to be able to prove the following to be true:

That a fiduciary relationship existed between you and the other party;
That said duty was breached;
That a breach entitles you to a remedy;
That the breach caused you to suffer financial damages; and
That the breach was a result of someone taking advantage of your trust.

If you can prove the above points to be true, you may be able to seek monetary and/or other types of remedies. What type of remedy you are awarded depends on the type of breach and the impact it had on you or your business. For instance, if a partner moved profits into a personal bank account or an account held by an entity in said partner’s name, you may be able to collect monetary damages. If a manager breached a duty to you and your other partners, shareholders, officers and/or directors, you may be able to have the individual removed from the partnership.

When You Are Accused of a Breach of Fiduciary Duty

If you are reading this because you are guilty of breaching your fiduciary duty, the best thing you can do is retain the help of an experienced lawyer who can help you begin building your defense. The partner filing the claim has the burden of proof to show that you took advantage of your position to benefit yourself at the expense of the company.

Retain the Help of a Skilled Attorney Today

Whether you are on the receiving end of a breach of duty claim or are the claimant, it would serve your best interests to hire a business litigation lawyer. At Cloud Willis & Ellis, we are prepared to help you through this tricky situation and get back to business as usual. Call now to schedule your appointment today.

Failure to Use the Oxford Comma May Come Back to Haunt You

In the grammar world, the Oxford comma is of hot debate, one that has divided friends, family, and coworkers for decades. There are people who believe strongly in the Oxford comma, which is a comma used after a conjunction in a series of three or more items (i.e. turkey, mashed potatoes, and gravy), and then there are those who think that the Oxford comma—also known as the serial comma—is highly unnecessary and who would do away with the last comma entirely. While each style of writing takes one stance or another, there really is no right or wrong position, except maybe, in a court of law.

At Cloud Willis & Ellis, our business litigation attorneys help business owners draft sound contracts that leave little room for interpretation, which is why believe that the Oxford comma is an issue that needs to be addressed. A recent case involving Oakhurst Dairy and its drivers is a good example of why.

The Overtime Dispute That Was Caused by a Missing Comma

In 2014, a relatively small dispute gained notoriety when a group of drivers sued their employer, Oakhurst Dairy, for over four years of overtime pay that had been denied. Under Maine law, individuals who work more than 40 hours in a workweek must receive 1.5 times their normal pay for each hour worked overtime. As with all laws, there are some exemptions. In this case, the exemption was:

“Overtime rules do not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:

Agricultural produce;
Meat and fish products; and
Perishable foods.”

The lack of an Oxford comma between “packing for shipment” and “or distribution of” created much room for interpretation. Drivers wanted to know, does the law make an exemption for employees who are involved in the distribution of the three listed products, or the packing for shipment or distribution of them?

Ultimately, the United States Court of Appeals for the First Circuit ruled that the missing comma created enough ambiguity for the drivers. It ordered the Portland dairy to shell out over $5 million in overtime pay to the drivers. Though a huge victory for the drivers and advocates of the Oxford comma everywhere, there is still no ruling on whether or not the verdict means that the skipped comma is an unnecessary annoyance or a defender of clarity. At Cloud Willis & Ellis, we believe that it is best to be on the safe side and use the Oxford in all contracts.

In defense of Oakhurst Dairy, the Maine Legislative Drafting Manual specifically dissuades the use of the Oxford comma, calling commas the “most misused and misunderstood punctuation marks in legal drafting and, perhaps, the English language” (Page 113). It cautions lawmakers to use the punctuation sparingly and thoughtfully. “Although authorities on punctuation may differ,” the guide continues, “when drafting Maine law or rules, don’t use a comma between the penultimate and the last item of a series.”

Despite what the manual stipulates, the fact is that the clause was ambiguous. As the drivers’ lawyer said, “It did create an ambiguity, which means you have to either add a comma or rewrite the sentence.”

Let a Skilled Attorney Help You Draft a Sound Contract

If you want to ensure that your legal contracts are binding, valid, and free from interpretation, hire an experienced business litigation attorney to help you draft it. Contact the team at Cloud Willis & Ellis, LLC via phone, email, or online contact form to schedule your consultation today.

Resources:

nytimes.com/2018/02/09/us/oxford-comma-maine.html?smid=fb-nytimes&smtyp=cur

maine.gov/legis/ros/manual/Draftman2009.pdf

mainelegislature.org/legis/statutes/26/title26sec664.html

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