1. Vanderpool, Frostick & Nishanian PC
Protecting Your Confidential and Proprietary Information
Employee’s Duty of Loyalty, Trade Secrets,
Non-Compete Non-Solicit and Confidentiality Agreements
2013 PWSHRM and VFN
EMPLOYMENT LAW SUMMIT
October 4, 2013
Presented by:
Kristina Keech Spitler, Esq.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

2. Vanderpool, Frostick & Nishanian PC
This presentation and information is designed to provide general information, is not intended to constitute legal advice and should not
be utilized as a substitute for professional services in specific situations. If legal advice or other expert assistance is required, the
services of a professional should be sought.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

3. Vanderpool, Frostick & Nishanian PC
Kristina Keech Spitler, Esq. is a partner with the law firm, Vanderpool, Frostick & Nishanian, P.C., where she represents and advises businesses on employment and business issues and litigation including matters relating to hiring and firing, breach of agreements, non-competes and restrictive covenant agreements, discrimination, disabilities and accommodations under the Americans with Disabilities Act, Fair Labor Standards Act (wage and hour law), Family Medical Leave Act, defamation, and other legal concerns for employers. In addition, her practice includes drafting and updating handbooks and policy manuals, and drafting severance agreements. Ms. Spitler is a highly rated speaker and trainer on employment law issues.
Ms. Spitler was recognized as one of Virginia’s “Legal Elite” in Labor/Employment Law by Virginia Business Magazine in 2010 and In 2009, Ms. Spitler was named as one of Virginia’s “Most Influential Women” by Virginia Lawyers Media. She received The Loy E. Harris Award from the Mayor of the City of Manassas in 2008.
Ms. Spitler has been a featured speaker on employment law issues on WUSA Channel 9 News and has served as a resource and quoted in Workforce Management Magazine.
Contact at or (703)
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM

4. Vanderpool, Frostick & Nishanian PC
“While no single conversation is guaranteed to change
the trajectory of a business, a career, a marriage, or a life,
any single conversation can.”
-- Susan Scott
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

5. Protecting An Employer’s Business
Employee’s Duty of Loyalty to Employer
Uniform Trade Secrets Act
Non-Compete, Non-Solicit, and Confidentiality Agreements
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

6. Employee’s Duty of Loyalty to Employer
Generally, every employee owes a duty of loyalty to their employer during employment.
This duty of loyalty includes a duty to not compete with his/her employer while employed.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

7. Employee’s Duty of Loyalty to Employer
In Virginia, employees (even officers and directors) can generally make plans to resign and subsequently compete with their employer without breaching their duty of loyalty.
But how far can they go in “making plans”?
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

8. Employee’s Duty of Loyalty to Employer
Employees cannot:
Use employer’s trade secrets for own benefit
Misuse employer’s confidential information
Usurp corporate opportunity
Tortiously interfere with a contract or business expectancy
Engage in common law or statutory conspiracy to harm another in his trade or business
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

9. Employee’s Duty of Loyalty to Employer
Directors and Officers
Pursuant to Virginia law, directors and officers are suppose to exercise good faith business judgment as to the best interest of the corporation.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

10. Virginia Uniform Trade Secrets Act
Uniform Model Act
Virginia enacted its version of the Uniform Trade Secret Act in 1986.
Maryland and DC have also enacted versions of UTSA.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

11. Virginia Uniform Trade Secrets Act
Misappropriation of Trade Secrets:
Information is a “trade secret”
That has been misappropriated
Which has independent economic value
Is not generally known
Is not readily ascertainable; and
Has been the subject of reasonable methods to maintain secrecy
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

12. Virginia Uniform Trade Secrets Act
Trade secret is defined as:
“information, including but not limited to, a formula, pattern, compilation, program, device, method, technique or process, ….”
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

13. Virginia Uniform Trade Secrets Act
Examples of protected trade secrets:
customer/client/patient lists
pricing information
business strategies
sales techniques
methods of doing business
computer software
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

14. Virginia Uniform Trade Secrets Act
Misappropriation means:
Acquisition by a person who knows or has reason to know that the trade secret was acquired by improper means; or
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

15. Virginia Uniform Trade Secrets Act
2. Disclosure or use of a trade secret by a person who
Used improper means to acquire knowledge of TS; or
Knew or had reason to know that his knowledge of the TS was:
Obtained from a person who used improper means to acquire it;
Acquired under circumstances that required a duty to maintain its secrecy;
Derived from a person who owed a duty to the person seeking to maintain its secrecy; or
Acquired by accident or mistake.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

16. Virginia Uniform Trade Secrets Act
Trade Secret must not be generally known to those in the relevant industry or trade.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

17. Virginia Uniform Trade Secrets Act
Trade Secret is not readily ascertainable by proper means.
If obtain information by proper means, the information cannot be a trade secret. For example, information obtained from telephone book, industry or business sources, published patent, reverse engineering, or observing the product or service on public use or display is not obtained by improper means.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

18. Virginia Uniform Trade Secrets Act
The trade secret has been subject to reasonable efforts to protect its secrecy.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

19. Virginia Uniform Trade Secrets Act
Remedies for Misappropriation of Trade Secrets
Injunctive relief
Damages
Actual loss caused by the misappropriation; and
Unjust enrichment; or
Reasonable royalties
If willful and malicious
Punitive damages (capped at $350,000)
Recovery of attorneys’ fees
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

20. Virginia Uniform Trade Secrets Act
VUTSA does not affect
Contractual remedies agreed upon by the parties
Other civil or criminal remedies not based upon misappropriation of trade secrets
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

21. Non-Compete, Non-Solicit and Confidentiality Agreements
Businesses use contracts between the business and its employees to protect its confidential and proprietary information.
It’s a contract – must meet minimum requirements for a contract
Is continued employment sufficient consideration?
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

22. Non-Compete, Non-Solicit and Confidentiality Agreements
Confidentiality agreements can be another tool for employers to protect their information and data even if it does not meet all requirements for a trade secret to be protected under VUTSA.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

23. Non-Compete, Non-Solicit and Confidentiality Agreements
Non-Compete and Non-Solicit Agreements are special kinds of contracts – they are considered restraints on trade (limit freedom of employees to move to different jobs or start own business which is generally favored in free market systems).
US courts do not favor them. Many foreign countries and some states find them unenforceable all together. In US, depends on law of each state.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

24. Non-Compete, Non-Solicit and Confidentiality Agreements
Covenant not to compete will only be enforced if:
The restraint is no greater than is necessary to protect the employer in legitimate business interest;
The restraint is not unduly harsh and oppressive in curtailing employee’s legitimate efforts to earn a living; and
The restraint is reasonable from a public policy standpoint.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

25. Non-Compete, Non-Solicit and Confidentiality Agreements
A covenant not to compete must be reasonably limited as to:
length of time the employee cannot compete after end of employment;
The geographical territory in which cannot compete;
Prohibit only activities which would compete with or adversely affect the employer’s legitimate business interests.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

26. Non-Compete, Non-Solicit and Confidentiality Agreements
Covenants to not solicit
- customers/clients/patients; and/or
- employees/vendors/consultants
are considered less restrictive than non-compete provisions.
Court may give non-solicit provisions slightly more leeway.
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

27. Non-Compete, Non-Solicit and Confidentiality Agreements
Enforcement against senior executives v. lower level employees
Enforcement when agreement entered into from the sale of a business v. employer/employee situation
Enforcement when agreement entered into in teaming/subcontractor relationship
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

28. Non-Compete, Non-Solicit and Confidentiality Agreements
Courts’ interpretation and enforcement of these agreements over the last 20 years.
2012 Virginia Supreme Court decision in Preferred Systems Solutions, Inc. v. GP Consulting, LLC– some good news for a change
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

29. Non-Compete, Non-Solicit and Confidentiality Agreements
“Blue-penciling” – depends on state
Forum selection clauses
Enforcement against new employer
- Former employer’s claim for tortious interference with a contract or an alleged conspiracy to breach a contract or harm a business
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved

30. Let’s Play a Game to Practice What We Know
YOU BE THE JUDGE!
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved 30

31. Vanderpool, Frostick & Nishanian PC
CONTACT INFORMATION
Kristina Keech Spitler, Esq. Vanderpool, Frostick & Nishanian, PC Church Street, Suite Princess Anne Street Manassas, Virginia Fredericksburg, Virginia (703) (540)
Vanderpool, Frostick & Nishanian PC
Where Business Goes SM
Copyright 2013 Kristina Keech Spitler All rights reserved