Hunton Employment & Labor Law Perspectives : Employment Lawyers & Attorneys : Hunton & Williams Law Firm : Labor Law Legislative Updates

This issue landed before the Texas Supreme Court after Marsh & McLennan Companies, Inc. (MMC) filed suit against a former managing director, Rex Cook (Cook), who resigned from its subsidiary, Marsh USA, Inc. (Marsh).  Cook resigned from Marsh about three (3) years after he executed a non-solicitation agreement that contained confidentiality requirements as well as a restrictive covenant.  Marsh granted Cook the option to purchase stock if he signed the non-solicitation agreement.  The stock option program was designed to give certain choice employees the opportunity to become part owners of Marsh as well as motivate them to contribute to the company and benefit from the company’s long-term success.  

The trial court granted Cook’s motion for partial summary judgment ruling that the non-solicitation agreement was an unenforceable contract under Light v. Centel Cellular Co. of Texas, 883 S.W.2d 643, 647 (Tex. 1994), a case in which the Texas Supreme Court held that consideration for a non-compete agreement must give rise to “the employer’s interest in restraining the employee from competing.”  Marsh USA, Inc., 2011 WL 2517019 * 2, 7.  The Texas Court of Appeals agreed with the trial court, specifically “holding that the transfer of stock did not give rise to Marsh’s interest in restraining Cook from competing.”  Id. at 2.  The Supreme Court reversed the judgment of the Court of Appeals and remanded the dispute to the trial court for further proceedings.  Id. at 11.

Even though the CNCA was enacted to strike a balance between healthy competition in the market and reasonable covenants, judicial interpretations of the CNCA have not always fostered this goal.  Id. at 18.  For over a decade, courts have wrestled with the restrictive interpretation of the CNCA in Light.  Diverging from Light, the Marsh court ruled that goodwill is a protectable interest according to the express language of the CNCA and determined that Marsh “linked the interests of a key employee with the company’s long-term business interests” when it awarded Cook stock options.   Id. at 14.

The ruling in Marsh demonstrates an interest in enforcing the terms of the CNCA and its purpose, which was to “expand rather than restrict the enforceability of” non-compete agreements.  Id. at 9. The significance of the Marsh ruling is that stock options can satisfy the CNCA’s requirement that there be a nexus between a restrictive covenant and a protectable interest, including but not limited to, the goodwill of a business.

Labor and employment partners Juan Enjamio and Terry Connor were among the authors who contributed to the book. Labor team associates Marcia Ganz, Anna Lazarus, and Sarah Ratner and former colleague Valerie Njiiri also contributed to the chapter relating to privacy in the workplace, which includes topics such as standards governing employee monitoring and background screening of employees and applicant.

Key chapters on privacy and the work place include the following:

• In General
• Labor and Employment Laws
• Background Screening of Employees and Applicants
• Disposal of Employee Personal Information
• Protection of Social Security Numbers
• Health Information
• Workplace Monitoring
• Privacy Torts
• Conclusion 

The deskbook also provides a detailed overview (with thousands of specific citations for the legal practitioner) of those areas of information privacy and data security law that have the greatest impact on and are most relevant to U.S. businesses operating in the global arena.  In addition, the treatise contains a collection of sample documents, charts, checklists and other compliance-enabling tools.  For additional information, visit our website at www.hunton.com.

Most modern companies are familiar with the need for day-to-day data security measures to protect confidential information.  During the chaos associated with conducting a mass layoff or downsizing, however, protecting confidential information often becomes less of a priority at a time when companies are most vulnerable.

Particularly disturbing is a recent study finding that as many as 58% of former employees have stolen data from their former employers, and 68% of those employees planned to use that information at their new jobs!  With the ease of which current technology allows for the instantaneous transmittal of electronic information, stealing company data is far from a hard or complicated endeavor, and can be as simple as a click of a mouse.  Most commonly, former employees take company information by downloading it to CDs, DVDs, and flash drives, or simply attaching the information to an email. 

The good news is that data loss during downsizing can be prevented with a few simple measures:

• Require all new employees to sign a confidentiality and non-disclosure agreement.
• Conduct ethics training to ensure employees understand the magnitude of taking proprietary or confidential information from the company.
• Provide company owned storage devices to employees, and prohibit the use of personal storage devices (such as a USB drive).
• Backup, Backup, Backup.  If an employee leaves with information that is not located anywhere else, it will be gone forever.
• Interview departing employees to review signed confidentiality and non-disclosure agreements and obtain another signed acknowledgment.
• During the exit interview, obtain a list of all of the confidential information, files and data that the departing employee may have had access to.
• After the exit interview, conduct a review or audit of the departing employee’s paper files and electronic documents to ensure nothing is missing.
• Monitor the departing employee’s conduct after the exit interview, including the employee’s computer activity, to look for any abnormal downloading of company files.
• Prepare a list of all company property given to the employee and returned upon termination, including company laptops, blackberries, and any storage devices.
• Immediately disable a departing employee’s access to company networks, computers, entry points and parking lots.