Mass. case sheds light on confidential, proprietary info
At-will employees who have not signed a non-solicitation or non-competition agreement are generally free to go into competition with their former employer, yet are prohibited from revealing confidential and proprietary information. A recent Massachusetts case illustrates that confidential and proprietary information that cannot be used by a former employee in competition with their former employer needs to truly be confidential information and not just what the employer states is confidential information.
In the case of Head Over Heels Gymnastics Inc. v. Harriett Ware and South Shore Gymnastics Academy Inc., the claim by Head Over Heels Gymnastics against its former employee, Harriet Ware, is that Ware misappropriated trade secrets, being the customer list. The Appeals Court agreed with the Superior Court that the claim should not go to trial.
Head Over Heels Gymnastics is an established gymnastic academy offering training and recreation activities to high-level and less-talented gymnasts. In 2006, Head Over Heels hired Ware as an at-will employee to train mostly high-level gymnasts. It maintained a list of persons who trained with the company, along with their families. The list included names, addresses, telephone numbers and email addresses, and the information was available to all employees and was distributed to all trainees and their families so that they could communicate with each other directly.
Head Over Heels never informed Ware or any other person that the list constituted confidential information or otherwise was a trade secret. In 2012, Ware began putting together a business plan for her own gymnastics company, South Shore Gymnastics Academy. She represented in an affidavit that she performed this work off hours and had not contacted Head Over Heels customers while employed there. Head Over Heels fired Ware, and eventually approximately 30 customers left Head Over Heels and began training with Ware at South Shore.
The Superior Court and thereafter the Appeals Court both noted under Massachusetts that an at-will-employee may properly plan to go into competition with their employer and may take active steps to do so while still employed. The court further found that since there was no evidence that Ware was contacting customers while still employed with Head Over Heels – and that the customer list was freely distributed to not only all the employees, but also the trainees and their families – there was no legitimate claim by Head Over Heels against Ware, and therefore summary judgment was granted against Head Over Heels, preventing it from presenting its claim against Ware at trial.
For New Hampshire employers, there is a Uniform Trade Secret Act that protects against misappropriation of trade secrets, and under both New Hampshire and Massachusetts law, the outcome in this case under these facts would have been the same: no legitimate claim against Ware, since the customer list was not confidential.
If an employer wants to treat information as confidential so that former employees cannot use it in competition with them, then the employer needs to take reasonable steps to, in fact, keep the information confidential. When in doubt, employers should seek the advice of employment counsel to take the reasonable measures necessary for confidentiality. These measures may include having confidential information stored electronically under passwords given only to those with a need to know, and also entering into confidentiality agreements with employees clarifying what information is confidential and cannot be used by them outside of the employer’s business – and obligating them to turn over all confidential information and company documents and property to the employer upon the termination of the employment relationship. Such employment confidentiality agreements are generally enforced by the courts, since they are generally stating "do not steal from us" rather than employment non-competition or non-solicitation agreements, which generally state "do not work in competition with us after you leave us."
J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Marr is licensed and practices in New Hampshire and Massachusetts. He can be reached at firstname.lastname@example.org.