Notes On: Safeguarding Personnel Information as Trade Secrets or Other Confidential or Protected Matter
Kraus, Anthony, Labor Law Journal
Protecting company personnel information against its disclosure to and exploitation by competitors has been widely recognized by courts as a legitimate concern. In Freedom of Information Act litigation, courts have concluded in some instances that releasing a business's employee roster and related information would lead to employee raiding and have found them to be immune from disclosure under Exemption 4, applicable to trade secrets and other confidential commercial information.1 In some bankruptcy proceedings, judges have sealed such information to avoid facilitating the piracy of the debtor company's personnel and aggravating its already precarious financial condition.2 Courts also have approved limitations on discovery and issued protective orders to safeguard such information against improper competitive use.3
II. Preventing Disclosure by Departing Employees
To avert the same potential threat, company counsel often attempt to keep departing employees from misappropriating or using their former employers' personnel information for the benefit of new employers. One common means of protection is through employee confidentiality agreements, which sometimes include such information as part of the protected matter, with the employee being subject to an injunction and damage liability if such information is disclosed or used outside the company. Company counsel also have sued departing employees under other legal theories to avert wrongful exploitation of such material. Protection can be sought on the ground that it constitutes trade secrets. In some jurisdictions, even when trade secrets are not involved, disclosure or use of personnel information also can be actionable if it was originally revealed to the employee in a confidential relationship, or if it is insider information that has been misused by a company fiduciary. In such cases, any new employer for whose benefit the information has been exploited typically is joined as a defendant for aiding and abetting such breaches of duty and for tortious interference with confidentiality agreements.
While the most direct way to prevent raiding by departing employees is through anti-po aching restrictive covenants, legal protection against the disclosure or use of employee information can play an important supplemental role. Some courts have invalidated anti-po aching covenants; and drafting such provisions carefully enough to avoid enforceability pitfalls, and also broadly enough to avoid easy circumvention, can be challenging. Such covenants also usually must be limited to a relatively short period of operation. These limitations can be mitigated in part when departing employees are precluded from exploiting personnel information. Also, such a general prohibition can help avert misuse of personnel information for purposes other than employee poaching, such as for projecting labor costs of a company for use in preparing competitive bids against it for work.4
Predictably, lawsuits brought against former employees seeking relief for the disclosure or use of personnel information have had mixed results, although a significant number of courts have sustained such claims in one form or another.
III. Employee Identities
Of the types of human resource information which employers can seek to have departing employees prevented from disclosing, the most basic is the identities of company personnel. Such information has been found to be a trade secret or confidential in several instances.5 The cases have protected the identities of employees engaged in such varied occupations as investigative services, sales of pre-paid legal services, railroad operation, sales of women's apparel, hair replacement and home nursing.
Identities of personnel, however, are also the type of employee information that courts typically can be most resistant to safeguard. Such information has been deemed by some courts to be insufficiently important because it would not "so devastate a company if disclosed to the wrong person that it could be characterized as a trade secret. …