New jobs lead to lawsuits for some

Businesses accuse former employees of stealing secrets

November 04, 1999|By Del Quentin Wilber | Del Quentin Wilber,SUN STAFF

Enticed by better offers in today's robust job market, employees are fleeing their companies as never before. Yet many have discovered a snag that comes with their new stock options and higher salaries -- lawsuits.

Increasingly, employers are suing their former employees, accusing them of violating contractual agreements by joining compet- itors and taking secrets with them. As technology and information increasingly drive the economy, experts say, departing employees can do more damage than ever -- with just a few clicks of a mouse granting them access to confidential files stored on floppy disks.

The trend is evident even in a small jurisdiction such as Howard County, with its plethora of high-tech and information-based businesses.

One Columbia company is suing a former employee, claiming that he created a business while working there and then stole a company database. Another company says that a technician left for another employer and tried to lure its clients. A business that provides automated teller machine services to shops run by Korean-Americans is suing former workers who, the suit alleges, bad-mouthed the company and tried to solicit its clients.

Because competitive boundaries are expanding -- West Coast businesses can serve East Coast clients by using computers and the Internet -- data thefts can result in huge financial losses.

"Information provides a competitive edge," said Naomi Fine, president of Pro-Tec Data, a California consulting company that helps businesses develop strategies to protect confidential information. "In a hyper-competitive environment, where the most valuable asset is information, it makes sense that companies would take legal action to protect their most valuable assets."

Though no concrete statistics exist, interviews with lawyers, employees and company officials revealed that workers are increasingly asked to sign contracts that limit their ability to compete and disclose information to new employers.

A survey by Exec-U-Net, a nationwide networking organization, showed 35 percent of executives were being asked to sign employment contracts, up from 26 percent the year before. Those contracts usually contain clauses prohibiting competition and disclosures.

Judges and lawyers said they have noticed a surge in lawsuits against former employees. Many involve accusations that employees stole information.

OnSite Technologies in Columbia is suing a former employee, accusing him of creating a business while working at OnSite and then taking clients from OnSite.

The suit accuses Ralph P. Riddle of copying a database onto his computer before he was fired in September 1998 and then trying to recruit several OnSite employees for his business. He hired one employee, James D. Huelskamp Jr., who also is accused of taking a database containing information about OnSite's customers.

In a response filed last week, Riddle acknowledged starting a company, but he said it does not engage in the same business as OnSite, a temporary agency specializing in technical and engineering services. He also denied copying the database onto his computer. Riddle referred questions to his attorney, who declined to discuss the case.

"It's easier for employees to take data with them," said Gary B. Eidelman, OnSite's lawyer, who declined to discuss the case but spoke generally about competition and disclosure issues. "The competitive nature and technology age are leading to increasing attempts by employers to enforce these agreements," he added.

Known as "noncompete" agreements, the contracts generally limit employees' ability to find jobs in related fields. "Nondisclosure" agreements aim to prevent employees from revealing company secrets to future employers.

Experts said that more companies are requiring a broader range of employees to sign the increasingly detailed agreements, versions of which have existed for decades. But the lawsuits of yore involved set areas, measured in miles. Today's industries are expanding the boundaries.

"Previously, a human being could only get so far, so fast, and a 35-mile radius meant something," said Benjamin W. Hahn, an Annapolis lawyer who handles many employee-business lawsuits. "A lot more business is being done at great distances and being done electronically."

Hahn added, "The ability of people to use information to hurt an employer has gone up astronomically. Somebody with a computer and a modem and telephone jack can gain enormous amounts of competitive advantage at no cost to himself."

Companies are also willing to file suit against former employees who didn't sign noncompete or nondisclosure contracts, and to continue suits even when those contracts are nullified in court.

Take William Green and Peak Technologies. Green was working for Peak in Columbia as a technician who fixed and restored printers. But when Peak decided to give up the refurbishing business, Green decided to refer that business to a competitor and accepted a $500 fee, according to a lawsuit filed by Peak.

Green then left Peak and began working for the competitor. He said he wanted to find a better job doing what he likes best.

The suit accused Green of violating a noncompete agreement that he signed years earlier. But a Howard County judge dismissed that allegation, leaving Peak to press a claim of breach of loyalty.

Though trends show that technology- and information-based companies are requiring more workers to sign agreements, experts said, officials at even the most staid businesses have realized the danger in letting a sliver of information leak to a competitor.

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