When Trade Secrets Aren’t Secret

In a disturbing development, the New Jersey Supreme Court ruled that an employee may take confidential files for the purpose of helping in the prosecution of a discrimination claim. The Court, ruling in Joyce Quinlan v. Curtiss-Wright Corporation, found that the employee’s use of the confidential materials was a protected action for which termination would be improper.

Joyce Quinlan had worked for Curtiss Wright for approximately 20 years when she came to believe that she had been wrongfully passed over for promotion in favor of a male employee. She then devoted herself to the collection and copying of over 1,800 documents from personnel files and project work files to which her position gave her access.

Selecting documents she believed were helpful to her assertion of gender bias within Curtiss Wright, Quinlan turned the documents over to her attorneys. The documents were admitted at trial and served as the basis for a significant award against Curtiss Wright, including punitive damages.

The Supreme Court of New Jersey upheld the verdict.

In its ruling, the Supreme Court attempted to balance the interests of aggrieved employees with those of employers seeking to preserve the confidentiality of their information.   In so doing, the Court acknowledged the competing interests of each party, stating:

In making these evaluations, the court must be mindful that both employers and employees have legitimate rights. Employers have the right to operate their businesses within the bounds of the law and legitimately expect that they will have the loyalty of their employees as they do so. Employees have the right to be free of discrimination in their employment and the right to speak out when they are subjected to treatment that they reasonably believe violates that right. Balancing all of those considerations is a difficult and important task.

Applying a 7 point balancing test, the Court made it clear that employees are generally safe copying and using an employer’s confidential documents if: (1) the employee acquires the documents in the normal course of his or her job duties; (2) the documents are delivered only to counsel; (3) the employee has a good faith basis for believing s/he has a meritorious case; and (4) the copying of the documents does not interfere in the employer’s business.

What made the Quinlan ruling so alarming was that it was rendered after a thorough review of applicable federal and state case law. The prospect that the Quinlan decision could be adopted by Maryland and other states should send a shock wave through employers seeking to protect their trade secrets and confidential records.

While certainly not urging employers to shield illegitimate or improper discriminatory behavior, we would highly recommend that companies review their document management and security policies with an eye toward preventing unauthorized access. Our recommendations are as follows:

  1. Ensure that applicable written policies place employees on notice that copying or scanning documents as well as removal of documents from the workplace without proper authorization is a termination-level offense.
  2. Review security measures for personnel files – both medical and administrative – as well as other confidential documentation, including trade secrets, pricing, and customer lists. Determine: (a) who has access; (b) when access is permitted; (c) whether unauthorized access is possible; and (d) how management would know if there was unauthorized access, copying, or removal of files.
  3. Update any security measures, document control technology, and access procedures necessary to ensure that your documents only go where you want them to go.

Sure, I know this may sound a bit alarmist, but consider one thing about document management and security:

It is better to have it and not need it, than need it and not have it.

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This entry was posted on Tuesday, March 18th, 2014 at 6:46 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.